As if the wireless market weren't interesting enough, Qualcomm
The deal will cost Qualcomm $600 million in cash and stock up front, with future earn-outs of $200 million also possible. This marks Qualcomm's largest acquisition since it paid $1 billion for Snaptrack's GPS technology in 2000.
On the surface, some investors are asking why Qualcomm would pay such a price for a private company that reportedly garners little revenue. After all, Flarion has only 200 employees and has yet to show significant traction in commercial markets based on its proprietary Flash-OFDM technology. For those following the behind-the-scenes tussles for dominance of wireless technology standards, however, it was a prescient move by Qualcomm.
Since Qualcomm's dramatic rise in 1999 -- and subsequent fall -- different camps of investors have been debating just what would unseat Qualcomm's dominance in garnering royalties from products using its CDMA technology. Since Qualcomm earns more than a billion dollars annually from patent licensing, investors are keen to see this high-margin revenue stream continue to grow. Acquiring Flarion can be utilized as part of both a defensive and offensive strategy to perpetuate Qualcomm's licensing business.
Regardless of how Qualcomm chooses to play this, there's no question that it is a major move by the company -- one that will have many long-term implications in the market. In a future column, I'll go through several important aspects of the Flarion acquisition and what new dynamics come into play.