Japanese manufacturer Kyocera agreed to buy Qualcomm's phone making unit on Wednesday in exchange for a five year commitment to use Qualcomm's chips.
The move follows Qualcomm's statement in September that it planned to sell the business by the first quarter of 2000, hot on the heels of the sale of its wireless infrastructure business to Ericsson earlier this year. Other companies thought to have bid for the unit include Siemens, Motorola and Matsushita Electric.
Under the terms of the deal, Kyocera has agreed to purchase a majority of Qualcomm's Code Division Multiple Access (CDMA) chipsets and system software, but will also continue its existing royalty bearing CDMA license agreement with the firm.
Although financial terms were not disclosed, Qualcomm said it would take a $30 million hit for the first quarter of 2000 as a result of the alliance, and will create a new subsidiary to contract its services to Kyocera's newly formed handset unit for three years.
Yasuo Nishiguchi, Kyocera's president, said: "Kyocera will have a comprehensive global infrastructure for producing and delivering CDMA handsets."
The firm estimates that with its existing manufacturing operations and the newly acquired business that it should produce approximately 16 million wireless handsets, including CDMA based ones, in its fiscal year ending 31 March , 2001.
The aim, company executives said, was to provide Kyocera with entry into the North American phone market.
Qualcomm's shares slipped 2.3 per cent today to close at $484.44, but they are set to split on a four to one basis in the near future.
David Powers, a financial analyst at Edward Jones & Company, said Kyocera's acquisition of the Qualcomm phone business gives it a solid production facility in San Diego, with access to local CDMA engineers and a strong US sales and distribution effort.
"It gives them a good foothold in the US market, where CDMA has a relatively high market share," he added.
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