Qualcomm sets cat among Wi-Fi pigeons with Airgo purchase
Political pawn or technology asset?
This week Qualcomm announced two acquisitions in the non-cellular wireless arena, at least one of them bringing it significant intellectual property rights in WLans.
This is Airgo, the heavily backed start-up whose advanced MIMO smart antenna technology has been the basis of many products preempting the draft 802.11n fast Wi-Fi standard, and which looked set to provide the key technology for that specification, until it was wrongfooted by Intel and Broadcom.
As a weapon in Qualcomm's ongoing attempt to increase its influence outside its CDMA heartland, and strengthen its hand against Intel and Texas Instruments, Airgo could be highly significant, as much a political pawn as a technology asset.
The second acquisition, of the Bluetooth assets of RF Micro Devices (RFMD), is less fraught with implications for Qualcomm's rivals, but also brings it a strong position, and some IPR, in another wireless standard, and both purchases will strengthen the CDMA giant's recently announced and potentially disruptive consumer wireless platform, Snapdragon.
Airgo, rather like the chip giant's last highly impactful wireless purchase, Flarion, fits all the criteria for a Qualcomm acquisition, bringing strong technology that will broaden its key platforms and support its move into integrated multi-radio platforms; powerful IPR potential, which until now Airgo has lacked the weight to exploit effectively against the majors like Intel; acceleration of the creation of a major platform (Snapdragon) that will take Qualcomm beyond cellphones and into broader consumer device markets, again to the consternation of Intel and Nokia; and the chance to disrupt competitors' plans in a key growing market, fast Wi-Fi.
And, of course, any progress by Qualcomm to increase its patents influence among the IEEE standards, signaling its determination to replicate its 3G position in other emerging wireless markets, raises further speculation about what will be its next steps in the other key IEEE platform, WiMAX. Will it continue to pursue its own course, promoting its Flarion/802.20/FLO OFDM-based technologies as an alternative to 802.16, or will it seek an acquisition that will give it a Trojan horse to storm the enemy citadel and a leg up in its almost inevitable move to support WiMAX in its silicon in future?
Conceivably, the MIMO intellectual property it gains with Airgo could be applied to other OFDM platforms, its own or WiMAX.
Who might Qualcomm buy in WiMAX will be a favorite party game this holiday season, candidates include Soma, which already licenses the giant's patents for WiMAX and so might be friendly to the idea; or an innovative chip specialist such as Sequans. From the point of view of technology and potential for disruption, PicoChip would be a good choice, but would probably be hostile to the idea and would almost certainly attract counter interest from other chipmakers.
Back to the actual acquisitions. Qualcomm will pay cash for Airgo Networks and the majority of RFMD’s Bluetooth assets.
“Qualcomm's business strategy has always been integration, enhancing performance and reducing time to market by offering complete solutions,” said Dr Sanjay Jha, president of the company's CDMA Technologies unit.
Integration is the keyword of Qualcomm presentations now, as it is for Texas Instruments, and the two companies are storming well ahead of the market in their ability to squeeze multiple radios and other chip functionality on to increasingly small and low power devices, reducing cost and time to market for makers of handsets and other consumer products. Qualcomm's timing is right on two fronts, the incorporation of Bluetooth and Wi-Fi into handsets, its key market, is reaching critical mass and dual or triple radio phones are shifting from the high end to the volume market; and the service providers' move towards converged multimedia services delivered consistently to different clients from phones to music players to set-top boxes is giving Qualcomm and TI their best ever chance to spread their revenue sources beyond the cellphone sector.
In addition to supporting Airgo’s existing business, Qualcomm says it will integrate its 802.11a/b/g and 802.11n technology into select chipsets in its key Mobile Station Modem (MSM) range and into Snapdragon. Under the agreement with RFMD, Qualcomm will acquire the majority of the North Carolina-based company's Bluetooth assets, specifically those based in San Diego.
It will integrate the Bluetooth Enhanced Data Rate (EDR) technology, the next evolution of the short range standard, into MSM reference designs. RFMD offers chips for both the handset and headset markets and the remaining company sees the chance to work more closely with Qualcomm, helping to balance pressure in its core RF markets.
“RFMD hopes to become a broader development partner to Qualcomm's entire product portfolio for complementary products such as power amplifiers and front end modules,” said CEO Bob Bruggeworth. “RFMD is pleased that Qualcomm sees the value of our long term roadmaps for front end solutions. The sale of these assets is part of an ongoing relationship that we expect will continue to strengthen as we move forward."
Qualcomm estimates the combined effect of these acquisitions on its pro forma earnings per share to be dilutive by approximately $0.04 in its fiscal year ending September 2007, and modestly accretive in fiscal 2008. The acquisitions are expected to close by the end of December.
For Airgo, the acquisition gives the MIMO pioneer the chance to remain relevant in a sector that it led, but where it has been in danger of being sidelined by Intel and others. Like Flarion, it is a company with genuinely innovative technology and IPR, which took the gamble of trying to 'do a Qualcomm' and set new industry standards itself, rather than harmonizing with the giants’ efforts.
As we know, the memory of Qualcomm's success in this respect, coming from behind to set CDMA against GSM, has inspired many start-ups, but few of them achieve their goal, and they then become almost inevitable acquisition targets, often, ironically, for Qualcomm itself, which thrives on advanced technology that stays somewhat outside the industry party line.
Not that Qualcomm will seek to plough its own furrow in WLan. It is a member of the Wi-Fi Alliance, a contrast with its outsider status in WiMAX, and in the past year has reversed its old coolness towards 802.11 to become an ardent supporter, mainly from the point of view of supporting Wi-Fi in multimode chipsets alongside CDMA2000, W-CDMA and other radios.
Airgo will enable it to take a strong headstart in 802.11n as that standard emerges, although its recent promise of chips conforming to Draft 2 by year end is premature.
Broadcom and even the usually more cautious Intel are already announcing pre-standard products written to the current Draft 1, an approach previously criticised by Airgo, which claimed the draft is too unstable and that products created for it will need significant adaptation to support the final standard.
But market pressure is high and even Intel, which usually waits for finalized standards, is succumbing to the pre-802.11n pressure, announcing plans to put a pre-standard version of the technology into its Centrino chips by next year.
While Qualcomm will work within the 802.11n process, that is therefore still sufficiently fluid to leave room for it to try to influence the final standard and increase its own influence, and even if 802.11n is well down the track, it will have IPR to exert influence over future iterations and related wireless standards.
Qualcomm submitted its own proposal for 802.11n, which was rejected, and while we believe it is too late for it to use Airgo to suggest a significantly reworked specification to undermine the current Intel/ Broadcom-backed work in progress, it does put the weight behind the Airgo MIMO technology that the start-up itself lacked, and so may be able to slant the final 802.11n standard in its own direction (giving itself a technical headstart if not, given the auspices of the Wi-Fi Alliance, an IPR one).
As if to stress the technological headstart it believes it will have from Airgo, Qualcomm's acquisition announcement coincided with a claim from Airgo that it now has chipsets available that comply with Draft 2 of the 802.11n standard and are also backwards compatible with Draft 1.
This seems far-fetched given that Draft 2 will not be voted on until March 2007 and Qualcomm may have its own views on how that vote should go. At the most recent meeting of the 802.11n taskgroup, last month, it was made clear that 370 technical comments are still left to be addressed (12% of the total) with expected approval on the resolution of those comments by the January meeting.
Only after that can the ballot planned for March go ahead and the taskgroup move to a finalized standard and/or Draft 3. Qualcomm may well rein in such claims and take a more realistic approach.
To date, Airgo, largely no doubt, smarting from being sidelined by Intel, has been highly critical of the over-egged claims of some of its rivals to support draft standards that are not finalized, and, as we have seen, has held back from supporting drafts in advance.
Now it seems to be placing itself in the firing line just as its new parentage will, once again, make it a target for the attacks of the WLan chip majors, Intel, Broadcom and Atheros. Airgo may well help Qualcomm join those ranks, or at least line up with TI on the integrated multi-radio front, but that will not be achieved by unrealistic claims, but by the usual Qualcomm route, genuinely strong technology, sharp marketing and acute politics.
Copyright © 2006, Faultline
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