Qualcomm Surges After China Prepares to Open Up CDMA Market

Qualcomm also agreed to market the Internet services of Net2Phone.
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Updated from 3:31 p.m. EST

Shares of

Qualcomm

(QCOM) - Get Report

jumped Monday on news China was preparing to open its mobile phone sector to companies that use CDMA digital wireless technology.

Qualcomm, a developer of digital wireless communications products and services, is considered the dominant player in the market for code division multiple access technology, accounting for 90% of the CDMA chips worldwide and 12% of the handsets in the U.S., behind

Nokia

(NOK) - Get Report

and

Motorola

(MOT)

.

"Qualcomm owns a majority of the patents associated with CDMA," said David Heger, a telecoms analyst at

A.G. Edwards & Sons

in St. Louis. He has a maintain rating on the share and has not done any underwriting for the company.

Shares of Qualcomm climbed 26 1/8, or 7%, to close at 417 9/16, capping a steady run-up of more than 1,000% in the stock since March.

"Whenever there's a sign of an acceleration of the CDMA network deployment in China, Qualcomm moves," said Nikos Papageoriou, an analyst at

SG Cowen Securities

. SG Cowen has a buy rating on Qualcomm but does not do any underwriting for them.

Analysts said a report on

Reuters

cited

China Daily Business Weekly

as reporting that

China Unicom

, China's second telecommunications service provider, would begin construction of its CDMA network at the start of 2000 and finish the first phase of development by the summer.

Some 2.6 million subscribers are expected to sign up for service during the first phase, jumping to 10 million by the end of 2000.

Unicom will reportedly choose among 12 bidders competing to provide CDMA equipment.

Separately, Qualcomm also announced on Monday that it had agreed to sell its mobile communications system to two of China's largest transportation companies and that it would market the Internet services of

Net2Phone

(NTOP)

.

Qualcomm said it would form a partnership with

Guangdong South Satellite Telecommunications Service

to sell its satellite-based mobile communications and tracking system,

OmniTRACS

, to

Cosco

and

Sinotrans

.

The San Diego-based company did not offer a dollar value for the deal, its first in China.

OmniTRACS allows transportation companies to track their fleets in real time.

In addition, Qualcomm said it would market Net2Phone's Internet calling services through its Eudora email software.

Under the terms of the deal, Qualcomm said it would also market a co-branded Eudora Calling Card that will allow users to place calls and send faxes over Net2Phone's IP network.

Papageorgiou said the deal with Net2Phone wouldn't help increase revenues but noted that it signaled yet another step in the development of wireless Internet access.

Shares of Net2Phone gained 10 13/16, or 20%, to close at 63 7/8. Along with the Qualcomm deal, analysts said, the stock gained strength on bullish expectations for the company's financial

results , which were released Monday after the stock market closed. Net2Phone reported it lost 11 cents a diluted share in its fiscal first quarter, an amount that was 5 cents smaller than Wall Street expected.