IPhone's Debut on Verizon Would Boost Qualcomm, Hurt Infineon
Qualcomm Inc. stands to get its technology into millions of new phones if Verizon Wireless begins offering Apple Inc.’s iPhone, because the device would have to start using Qualcomm’s chip designs.
Qualcomm is the only company that can provide the signal processor that the iPhone would need to connect with Verizon’s network, said Will Strauss, an analyst for Tempe, Arizona-based Forward Concepts. Infineon Technologies AG, the provider of that chip for the AT&T Inc. version of Apple’s phone, would suffer by losing out on the Verizon shipments, he said.
Verizon will start selling Apple Inc.’s iPhone to customers in January, two people familiar with the plans said last month. The move could generate as many as 12 million new sales of the phone and cost AT&T a million customers, according to analysts’ estimates. For Qualcomm, getting onto the iPhone would solidify its position as the world’s biggest maker of mobile-phone chips.
“It’s got to be Qualcomm -- there’s no other option,” Strauss said. “It could be a very big deal.”
AT&T, the second-largest U.S. wireless carrier, has served as the nation’s only iPhone provider since the device’s debut in 2007. Verizon, the market leader, uses a different radio technology: code division multiple access, or CDMA, a standard that Qualcomm licenses to the industry. Signal processors are used to convert radio signals into sound and data in phones.
Emily Kilpatrick, a spokeswoman for San Diego-based Qualcomm, and Jeffrey Nelson, a spokesman for Basking Ridge, New Jersey-based Verizon Wireless, declined to comment. Apple doesn’t comment on rumor and speculation, spokeswoman Natalie Harrison said. Infineon didn’t immediately respond to an e-mail seeking comment.
Losing its grip on the iPhone would be a blow to Infineon, whose wireless-chip unit is already in flux. The German company is weighing options for the business, including a sale, two people familiar with the matter said last month. It hired JPMorgan Chase & Co. and opened a data room for potential buyers to review the books, one of the people said.
“It’s not going to put Infineon out of business, but it doesn’t help,” said Forward Concepts’ Strauss. Apple may consider replacing Infineon chips with Qualcomm products in its AT&T phones as well, he said.
Apple has sold more than 50 million iPhones since 2007. Shoppers snapped up more than 1.7 million units of the latest version, the iPhone 4, in its first three days on sale last month -- a record for Apple.
While the success of the product attracts attention to anything connected with it, signal processors are a tough market where prices are coming down, said Cody Acree, an analyst at Williams Financial Group in Dallas.
Qualcomm’s stock has tumbled 31 percent this year on concern that shrinking phone prices will continue to squeeze profit and sales. The company aims to return to growth this year after the recession bit into 2009 revenue. The iPhone alone won’t fuel a comeback, Acree said.
“It will garner attention,” he said. “But people are looking for a turnaround story.”
Verizon Wireless, co-owned by Verizon Communications Inc. and Vodafone Group Plc, will likely sell about 12 million iPhones in the first year of its release, according to UBS AG analyst John Hodulik. James Ratcliffe, a Barclays Capital analyst, has estimated that 1 million AT&T customers may leave that network as a result. Qualcomm sells about 100 million signal processors each quarter.
Qualcomm rose 41 cents to $32.37 at 4 p.m. New York time on the Nasdaq Stock Market. Shares of Cupertino, California-based Apple fell $1.54 to $246.94. Infineon was little changed at 4.75 euros today in German trading.