Qualcomm (Nasdaq: QCOM) shares surged Tuesday after the wireless equipment maker confirmed a deal with China Unicom to license its trademark CDMA technology.
Shares in the maker of Code Division Multiple Access (CDMA) digital wireless technology moved up Monday after it said it was in talks to supply wireless technology to China, and rose another 7 percent, or 8 3/8 to 135 3/8 Tuesday when it confirmed the deal.
Qualcomm's entry into China could open the market for other wireless phone players such as Motorola (NYSE: MOT), Nokia (NYSE: NOK), Nortel Networks (NYSE: NT), Lucent Technologies (NYSE: LU) and Ericsson (Nasdaq: ERICY).
Qualcomm and China United Telecommunications Corporation (China Unicom), which was chosen by the Chinese Government to negotiate the licensing guidelines, said Tuesday that the deal will result in the licensing of Qualcomm's intellectual property for the manufacture and sale of CDMA wireless equipment by domestic Chinese manufacturers. The installation of CDMA equipment in China Unicom's wireless network is expected to begin promptly, Qualcomm said.
The agreement "allows for the rapid expansion of CDMA in China and supports China Unicom's plans for a nationwide deployment of CDMA," said Qualcomm chairman and CEO Irwin Jacobs, in a press release
Under the agreement, Chinese manufacturers can make and sell subscriber units and/or infrastructure equipment for wireless applications, and will have to purchase their requirements of CDMA Application Specific Integrated Circuits (ASICs) from Qualcomm.
Wireless penetration in China's population of 1.2 billion is just 3 percent -- an average of 11.8 wireline and wireless phones per 100 people. The commercial CDMA network will have an initial capacity of 10 million subscribers this year, and exponentially grow potential for the next few years, according to China Unicom.
Qualcomm shares have been volatile. The stock had a big 1999, but took a hit in January on profit taking. The company also disappointed with its quarterly report, despite topping official estimates. The company also announced it would buy SnapTrack, a maker of software that helps locate wireless phone users, for $1 billion the next day.