STOCKHOLM -- Ericsson AB, the world's No. 3 cellular-phone maker, and rival Qualcomm Inc. agreed yesterday to share technology for wireless phones and equipment, ending a 2 1/2-year patent dispute.
Ericsson will buy an unprofitable Qualcomm unit that makes cellular-network equipment, and the companies will jointly support one standard for next-generation gear that lets users send and receive e-mail, hold video conferences and browse the Internet. Analysts predict 700 million new cellular phone users in the next five years.
The agreement will help Stockholm-based Ericsson take on rivals Nokia Oyj and Motorola Inc. in the U.S. cellular equipment market, and lets San Diego-based Qualcomm focus on making phones and developing new computer chips.
Most importantly, analysts said, it means next-generation equipment for cellular networks will be the same worldwide, enabling users to make and receive calls wherever they go.
"Resolving this issue for the industry is the big story here," said Brian Modoff, an analyst at BT Alex. Brown Inc., who rates Qualcomm "buy" and Ericsson "hold."
Before yesterday's agreement, Ericsson was supporting a next-generation standard that primarily benefited operators in Europe, while Qualcomm's standard was biased toward U.S. customers. The two have been battling over patents for the technology in U.S. District Court in Texas.
Ten years ago, Qualcomm introduced a new standard for digital cellular networks, called code-division multiple access, or CDMA. When no one would adopt the technology, Qualcomm, which was founded to focus on research and development, chose to manufacture equipment and phones to prove that CDMA provided more capacity on networks than rival standards.
While Europe is unified by one standard based on global system for mobile communication, or GSM, the United States has three -- GSM, CDMA and a third called time-division multiple access, or TDMA.
That has made it harder for the United States to back a single standard for the next technology due 2001. Meanwhile, the European Union and Japan have already chosen wideband CDMA, or WCDMA, which is backed by Ericsson and Nokia.
Now, Ericsson will have new broadband technology that includes both its own WCDMA and Qualcomm's CDMA2000. By 2002, about a quarter of traffic on cellular networks is expected to be data rather than voice, up from 2 percent today.
Pub Date: 3/26/99