InTel And Qualcomm Battle For Wireless

Stocks:  (QCOM)(INTC)(ERIC)(S)(MOT)

Qualcomm announced that it bought two chip companies, one in the WiFi space and one in Bluetooth. The move would appear to be one that puts QCOM in competition with Intel to get a piece of the wireless chip business. But why buy the two firms, RF Micro Devices and Airgo, when Intel owns almost the entire market.

Oddly enough, the news comes at the same time that Ericsson signalled that it might have a deal with Qualcomm on Wideband CDMA for third generation cell phones. The two companies have been fighting over the royalties due to Qualcomm for the technology. The battle has gotten so bitter that Eriicsson and other cell companies have complained to the European Commmission to try to move the issue into the arena of government regulation. 

Qualcomm’s stock has been battered by concerns over antitrust actions due to the royalties it charges cellular phone makers. The stock is down from $53 in May to about $36.  There has also been significant concern that new wireless technologies like the WiMax standard supported by Intel, Samung, Motorola, and Sprint could damage Qualcomm’s current lock on the broadband cell industry.

It would appear that someone woke up at Qualcomm. The only way to effectively fight WiMax is to make piece with large customers like Ericsson and acquire technology that will allow it to combat Intel on other wireless fronts. Qualcomm may have to give in on the amount it charges firms like Ericsson, but that is better than protracted litigation an losing a large customer completely.

With Intel’s huge lead in WiFi and Sprint building a WiMax network in the US, it may be a bit late in the day for Qualcomm to come to its senses. If so, $36 may be a high water market for Qualcomm for some time to come.

Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.