Sunday, January 23, 2011

Qualcomm Buys Atheros

Giant mobile chip maker buys wireless networking behemoth: It's a mark of how long I've been covering the industry that I remember when Atheros was a plucky startup, defending its alternative encoding proposal for 802.11g by citing distances the standard could reach in the warehouse the company owned (and used for testing). Ah, it's come a long way to this deal in which Qualcomm has had a $3.1b tender accepted.

Qualcomm makes most of its money from mobile chips and associated patent licenses. The firm's big trouble aren't its finances, but the fact that it doesn't have a terrific path towards future growth of its core technologies. Qualcomm developed, licenses, and sells chips and systems for CDMA, the technology Verizon Wireless and Sprint Nextel (on Sprint's network) employ in the US. CDMA is in use by hundreds of millions of subscribers worldwide. But GSM is in use by billions.

Worse, Sprint and Verizon both chose paths other than Qualcomm's 4G vision: Sprint acquired a majority interest in Clearwire, which uses WiMax, while Verizon opted for LTE, the dominant GSM-evolved 4G flavor that will be deployed worldwide. Clearwire may eventually swap to LTE as well.

Qualcomm recently sold the spectrum it acquired for a kind of mobile television broadcast system called FLO that never took off. I was always dubious about broadcasting when the future was clearly narrowcasting. Qualcomm bet against the ability to delivery unique streaming video on demand in large quantities. The jury is still out on that over 3G networks; 4G has to be designed to make this practical. (Qualcomm received over three times its purchase price for the FLO spectrum from AT&T—$1.9b—which will use it for LTE, but still took a loss when FLO development and deployment is factored in.)

Qualcomm's purchase of Atheros makes perfect sense, as it gives the company an instant strong position in Wi-Fi, Bluetooth, and other related technologies, as well as relationships with most of the major networking vendors and computing manufacturers, including Apple. (Apple uses Wi-Fi and Bluetooth chips from a few vendors, but I believe Atheros and Broadcom remain dominant.)

However, it's worth recalling that Qualcomm also bought Airgo (in 2006), the pioneer in multiple-in, multiple-out (MIMO) antenna system technology when Airgo was at the height of its success in the industry. Airgo disappeared without a trace as a unique technology line, although its clear the patents were sucked into the corporate maw, and some MIMO techniques found themselves built into other products.

Juxtaposition: Qualcomm, Atheros, Verizon, Apple