Monday, August 22, 2005

Why Qualcomm Has Its Wallet Out

BusinessWeek analyzes Qualcomm's latest acquisitions and predicts more of the same as the company continues to stay ahead of the latest technology trends. In the space of a few days last week, the company acquired two companies, Elata and Flarion. The Elata purchase was to diversify further into software for cell phones and complement the company's BREW efforts, "allowing carriers to sell and deliver content to thei customers mobile phones."

It's on the network side of the equation where more work needs to be done to expand "its patents portfolio to encompass non-CDMA technologies." Analyst Albert Lin at American Technology Research said, "CDMA will be important for another 10 years, but after that it could be largely obsolete. The world will demand more." And so will investors who are use to the company's 42 percent operating margins and hefty royalty fees.

According to IDC's Shiv Bakhshi, "Qualcomm has to buy all the wireless know-how it can get its hands on to hedge its bets." Lin thought the Flarion acquisition is a good start, since its FLASH-OFDM (Fast Low-Latency Access with Seamless Handoff-Orthogonal Frequency Division Multiplexing) technology is "at least three times the capacity of today's CDMA."

Where Qualcomm will go next is anyone's guess. Possible targets could be in the WiMax or Ultra-Wideband (UWB) spaces opined Peter Hofstra, analyst for AIC funds in Canada. Lin predicted an investment in a mesh networks business was plausible too.