Siemens to buy Motorola handsets

Motorola has won support for its third-generation (3G) handsets with a new deal that will see Siemens, the fourth largest maker in the world, using Motorola's 3G phones and handset technology over the next four years.

In a long-term deal announced yesterday, Siemens said it will start shipping rebranded 3G phones from Motorola by the end of the year and that its own future 3G designs will be built around Motorola's 3G chips and software.

Motorola announced plans last year to chase original equipment manufacturer mobile handset business as well as produce its own handsets as a way to drive up earnings.

The strategy had already seen Motorola sign a $700m contract to deliver 3G handsets to Hutchinson.

According to Siemens, its first rebranded Motorola phones will start shipping early in the fourth quarter this year. This is well in advance of 2004, when a mass market for 3G handsets and services is expected to take off.

By then the company said it will start shipping its own phones designed around Motorola chipsets and software.

Siemens' decision to go with Motorola technology comes after the company failed to find a partner to help it split the cost of developing its own 3G handsets, after failed attempts to form a partnership with Toshiba.

Under the arrangement with Motorola, Siemens said it would still be able to deliver its first 3G handsets on time and that the deal will mean significant development cost savings.

The move will also bolster Motorola's mobile handset market share. The company, currently second in the world to Nokia, has lost ground to its Finnish rival over the past few years.

Under the terms of the deal, Siemens will rebrand Motorola's A820 phone until 2004 when the company will start using the Motorola i300 silicon and software handset architecture in its own 3G phone designs.

The decision to choose Motorola's i300 platform was based on time-to-market and volume considerations, the company said, although it declined to give any financial details. The agreement will last until 2006.