Motorola Putting Qualcomm Chips in High Speed Phones

Motorola Inc., the world's second-biggest cellphone maker, plans to use Qualcomm Inc.'s chips in future high-speed wireless handsets the companies said on Monday.

Qualcomm shares rose more than 3 percent after the news, which expands its share of the market for chips based on

Universal Mobile Telecommunications System (UMTS) high-speed wireless technology that operators in Europe and other parts of the world are using to deliver everything from Internet and video to music and game downloading to cellphones.

Qualcomm, the main supplier of chips based on CDMA, the most popular wireless standard in the United States, has also been working to build a business in UMTS chips, where it trails market leader Texas Instruments Inc.

Qualcomm said it had incorporated the Motorola pact "as much as it could" into the forward looking guidance it gave with its recent quarterly report.

A Qualcomm executive said the agreement was "largely a 2008 and beyond opportunity," during a Webcast of a meeting for analysts in London.

"For Qualcomm, the benefit is clear to us," Prudential analyst Inder Singh said in a research note. "The company strengthens its relationship with the No. 2 mobile handset vendor, and it adds to the UMTS growth potential."

Singh noted that Motorola's share of the UMTS market is currently less than 10 percent but said he expects that to improve over the next year.

Qualcomm shares were up $1.29, or 3.7 percent, at $36.53 in morning trade on Nasdaq.

The companies gave no details on the value of the pact. Motorola already uses Qualcomm's chipsets for CDMA. Freescale Semiconductor Inc, a spin-off from Motorola which has agreed to be bought by private investors, has been its main chip supplier to date but analysts had long speculated about a UMTS deal between Motorola and Qualcomm.

Freescale shares were up 1 cent at $39.69 on the New York Stock Exchange. Texas Instruments shares were up 37 cents at $29.11 also on the NYSE.

Copyright 2006 Reuters Limited.

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