Updated from 1:43 p.m. EDT
and the system it developed, the three largest mobile phone operators in South Korea have decided to use an alternate standard, developed by
, when they are granted licenses to offer high-speed Internet access.
Qualcomm shares fell sharply on the news on Friday. It finished regular trading down 5 1/8, or 8%, at 56 5/8.
are hoping to win the licenses for Internet access next year. When they do, they plan to use the wide-band code division multiple access, or W-CDMA standard, which was designed by Nokia of Finland and Ericsson of Sweden. It is also the third generation of the European global standard for mobile telecommunications, or GSM, which is used by more than 60% of the world's mobile phone market.
Qualcomm developed code division multiple access 2000 technology, which is based on its current code-division multiple access, or CDMA technology. That standard accounts for about 20% of the world's mobile phone market.
South Korea is San Diego-based Qualcomm's largest market, with Korea's 26 million mobile phone users hooked up with cellular phones that use Qualcomm technology.
A spokesman for Ericsson, Mads Madsen, confirmed the choice of the Korean operators, which was first reported on Friday by
Qualcomm did not immediately return calls for comment.
The decision by the trio of Korean operators could hurt Qualcomm on a few different levels. It may have an effect on the royalties that Qualcomm collects from the use of its technology, since it is unclear whether Qualcomm collects as much in royalties from use of the W-CDMA standard as it collects from use of the CDMA 2000 standard. (The developers of W-CDMA licensed the basic CDMA technology from Qualcomm.)
There is also competition among Qualcomm, Nokia and Ericsson to develop and supply chips for the W-CDMA standard.
"Also, if Korea, the oldest and largest CDMA geographic market, adopts WCDMA, it reduces the probability that neighboring countries in Asia
namely China and Japan will adopt CDMA2000," wrote Michael Ching, an analyst at
, in a report published Friday. He rates Qualcomm an intermediate-term neutral and a long-term buy, and his firm has done no recent underwriting for the company.
Nokia closed up 2, or 4%, at 54, while Ericsson finished up 5/8, or 3%, at 21 5/8.