Qualcomm will pay approximately US$600 million in Qualcomm stock and cash to acquire Flarion Technologies, plus an additional $205 million conditional on certain performance milestones being met over the coming years. Expected to close before the end of this year, the deal's completion depends on regulatory approval.
Comment: Privately-held Flarion is the owner of a wireless broadband technology based on OFDM called Flash-OFDM, and was trying to sell network infrastructure and chipsets based on the technology. The company won its first commercial customer with Digita in Finland in the 450MHz band (EuroView Daily Bulletin, 23rd June 2005), against competition from the CDMA450 EV-DO technology pushed by Qualcomm.
Flarion's technology has also been on trial with Nextel in the US, Vodafone KK in Japan, and T-Mobile in the Netherlands. However, the facts that it is a proprietary technology pushed by a small company was a brake for its adoption amongst the big operators, even when they found the technology very interesting and efficient. The acquisition by Qualcomm, one of the strongest suppliers and lobbyists in the mobile industry, could change the game.
For instance, after Nextel merged with Sprint, the new Sprint-Nextel chose CDMA EV-DO over Flash-OFDM. Might Qualcomm's commitment to OFDM prompt Sprint-Nextel to consider a combined CDMA/OFDM strategy in the future, we wonder?
Qualcomm is positioning itself for the future by acquiring Flarion for its OFDM intellectual property. OFDM will be an important component of next-generation radio technologies, and the value of the deal, up to $800 million for a company with virtually no sales, is a proof of Qualcomm's confidence in OFDM. Though Qualcomm is not a fan of WiMAX, another hot technology powered by OFDM, it has been investigating the OFDM field for a while. For instance, Qualcomm launched two enhancements to its CDMA solutions, namely CDMA2000 1XEV-DO Platinum Multicast and FLO technology, which both incorporate OFDM.
Flarion often said that it had no intention of becoming another Qualcomm. It certainly seems to have achieved this goal, though not in the way we expected.
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