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China Unicom tests GSM-CDMA bridge

Good week for Qualcomm

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China Unicom has tested Qualcomm technology designed to bridge GSM and CDMA networks. The system uses CDMA to transmit voice and data over a GSM network and the operator said it "works very much according to our requirements".

Such a combination could significantly boost Qualcomm, whose CDMA technology faces eventually being eclipsed by GSM and its successors. However, so far there has been little market acceptance of the approach, so a successful trial in China will help improve credibility and attract operators that wish to integrate CDMA and GSM networks.

Even if the long term prospects for CDMA are not bright, its 3G version, CDMA2000, is growing rapidly and taking advantage of the teething problems with the GSM-based 3G, W-CDMA. The CDMA2000 subscriber base reached 54m at the mid-year stage, an increase of 4 million from May to June. The total market for CDMA2000 and CDMAOne is now 164 million, said the CDMA Development Group.

Qualcomm, which owns many of the CDMA patents, will take advantage of this trend, and recently sold its one billionth chip, not bad for a company that launched its first CDMA wireless device 10 years ago with two customers, and now numbers over 50 manufacturing licensees and a range of 16 chipsets. It is also working hard to penetrate the GSM and W-CDMA markets where Nokia rules supreme.

Qualcomm's stock was upgraded to 'buy' by Merrill Lynch last week. The analysts pointed to the imminent roll-out of 3G networks as the main reason. "Although we questioned the economics of such deployment and expected delays over the last several months, we now believe that we are fast reaching 'the point of no return' towards 3G deployment with deployments in Japan, the UK, Germany, Italy, Spain, Sweden and France," said analyst Tal Liani in a research note. (Most of those deployments, of course, are based on W-CDMA.)

The company also said it would achieve the high end of its earnings guidance for the fourth quarter and full year, based largely on shipments of its Mobile Station Modem (MSM) phone chips and core CDMA products. In July it projected Q4 earnings of 27-29 cents per share and a revenue increase of 2-6% excluding its QSI strategic ventures unit. It now expects to ship about 20 million MSM chips this quarter.

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