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August 11, 2005

Qualcomm splurges $600 million on Flarion to bolster OFDM offering

Mobile technology developer Qualcomm is spending $600 million, with a possible extra $205 million dependent on performance milestones, for Flarion Technologies, the owner and vendor of the Flash-OFDM broadband wireless technology. Rik Turner reports...

By CBR Staff Writer

This is a high-ticket acquisition for a company like privately held New Jersey-based Flarion, which has a couple of minor customers in operation, a handful of avowed intents from companies that plan to deploy it and a bevy of trials underway in different parts of the world.

The issue is that Flash-OFDM is suited to in-building mobile data communications in a way that W-CDMA, the 3G technology for which Qualcomm owns many of the patents, is not, at least not in the 2.1GHz band that was allocated to it in Europe.

Flash-OFDM works in a variety of frequency bands, including 450MHz, and the shortcomings of W-CDMA in 2.1GHz in terms of mobile data are such that several countries in Europe are in the process of issuing separate licenses in the 450MHz band for broadband data services.

Qualcomm offers a version of its CDMA technology for that band (CDMA450) but recently lost out to Flash-OFDM in Finland, where a group won that country’s single broadband license in that band (five of the seven bidders proposed to use Flash-OFDM).

Indeed, one take on this acquisition is that Qualcomm sees OFDM as the future, since later generations of mobile technology (so-called 4G), will likely be based on that technology and not on CDMA, given its inherent superiority in handling data.

Jeff Belk, its senior VP of marketing, noted that the company has already diversified beyond CDMA2000 (the 3G version of CDMA) over the last couple of years, with at least two flavors of OFDM airlinks unveiled.

There’s CDMA2000 1xEV-DO Platinum Multicast and the MediaFLO System, both of which use OFDM airlinks, he said. It refers to its family of OFDM offerings as OFDMA (for OFDM Access) technologies.

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The diversification has gone even further than OFDMA, in fact, with Qualcomm now offering W-CDMA, Bluetooth and GPS chipsets as well as CDMA2000 ones, so the addition of Flash-OFDM was a logical next step, Mr Belk argued.

For what he termed the core frequency bands between 850MHz and 2.1GHz, where the bulk of the 700 million phones sold this year will operate, Qualcomm now has CDMA2000, W-CDMA and Flash-OFDM as a third emerging track, though he also acknowledged that different spectrum bands are popping up around the world such as the 450MHz band in Europe, where Qualcomm will now also have Flash-OFDM to offer as an alternative to CDMA450.

Joe Barrett, Flarion’s director of marketing for EMEA, echoed this line, arguing that, as a result of the Qualcomm acquisition, there are multiple choices of technologies, and there is now an OFDM choice supported by a company with a reputation for bringing technologies to market.

As to the touchy subject of Qualcomm’s IPR model, which in the past has made it unpopular with companies considering a license for its technology, the word from the top during an institutional investors and analysts call was that it won’t cost any more to move from a chip with a standalone CDMA2000 or W-CDMA airlink to a device combining it with OFDM.

It remains to be seen whether Qualcomm will be able to win over hearts and minds, many of whom have preferred towards Flarion precisely because it wasn’t Qualcomm. There are even those who suggest that unease with Qualcomm’s IPR strategy was among the reasons the European Union plumped for TDMA rather than CDMA as the basis for the second-generation GSM standard it mandated for its territory in the last decades of the 20th century.

Of course, for 3G it had to move to a CDMA-based technology, which brought Qualcomm back into the running, but as OFDM could underscore 4G, Qualcomm needed to be well represented in that space too, which is the underlying rationale for this acquisition.

One thing San Diego, California-based Qualcomm is certain to do is push the standardization process for Flash-OFDM, which Flarion announced it would be undertaking earlier this year.

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