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1/23/2008
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Qualcomm Deal May Help Motorola Regain Handset Market Share

The two companies are partnering on a UMTS effort, built on the W-CDMA air interface and the GSM infrastructure.

Just minutes after Motorola unveiled its grim fourth-quarter report on Wednesday, including an unexpected prediction that its handset sales will continue their downward spiral, the company reported a new and broadening alliance with Qualcomm.

Motorola announced that it will design Qualcomm chipsets into some UMTS 3G handsets. A UMTS effort, built on the W-CDMA air interface and the GSM infrastructure, will compete directly with Nokia, which primarily uses the European-developed standard that has enabled Nokia to capture 40% of the world's handset market share. Nokia sells more handsets than the next three producers combined.

With Qualcomm in a bitter intellectual property battle with handset pacesetter Nokia, Motorola may be able to take advantage of the deal with Qualcomm to regain some of its rapidly depleting handset market share.

The Motorola-Qualcomm arrangement, however, won't help Motorola immediately staunch the flow of handset loss; the firm said its 40.9 million handsets shipped in the fourth quarter was down from 65.7 million a year earlier, and the numbers are going to be down "significantly" in the current quarter. Motorola said it will begin to design the Qualcomm chipsets into handsets at the end of the year.

The fourth-quarter report unnerved investors because Motorola had indicated the handset situation was looking up in its third-quarter report.

The fourth-quarter report was the first financial statement released by new Motorola CEO Greg Brown, who took over the reins at Motorola from Ed Zander last November. In a statement, Brown said: "We are focused on aggressively rationalizing the company's cost structure and working to get mobile devices back on track."

In its report Wednesday, Motorola issued a reminder that some of its units are performing well. It noted that revenue was gaining 11% in its home digital-entertainment device unit and 35% in its enterprise mobility operation, bolstered by sales stemming from its 2007 acquisition of Symbol Technologies.

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