Nokia sells off wireless modem business

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In an attempt to shed some flab, Finnish phone maker Nokia is selling off its wireless modem business unit to Japan’s Renesas Electronic for $200 million.
Unable to keep up with the likes of China’s Huawei and ZTE, whose wireless modem prices have been giving Nokia something of a beating in the past year or so, the firm has decided to cut its losses and sell the entire unit on the cheap.

Nokia’s wireless modems went from costing 120 Euros back in 2007 to just 30 Euros today, still expensive considering many European vendors hand them out for free as part of a bundle.
Speaking of bundles, Nokia appears to be bundling 1,100 employees off to Renesas as part of the deal, relocating them to Denmark, India and Britain for their troubles.
According to Nokia, the transfer is expected “to further strengthen Renesas Electronics’ position as one of the leading chipset vendors in the 3G and LTE market.” Indeed, the 3G market is seeing rapid growth accounting for close to one third of global cellular baseband revenues in 2009, says analysis outfit Strategy Analytics.
The firm adds that this partnership with Nokia provides Renesas with three different sources for fundamental 3G modem IP, NTT docomo, NEC Electronics and Nokia.
“Wireless modems are an integral part of today’s chipset solutions, and we believe that Renesas Electronics, as one of the key chipset vendors in the market, is in an ideal position to further develop this offering. The alliance enables us to continue to focus on our own core businesses, connecting people to what matters to them with our mobile products and solutions,” said Kai Oistamo, Executive Vice President of Nokia.
Nokia will finally be rid of the low margin albatross by the fourth quarter when the deal is finalized and says it then plans to focus on developing new technologies for Evolved High-Speed Packet Access (HSPA+) and Long-Term Evolution (LTE). The alliance is planned to be enhanced by long-term joint research cooperation on future radio technologies.
According to Stephen Entwistle from Strategy Analytics, this is a good move for Renesas which has offered GSM PAs and transceivers for the mainstream GSM market for more than a decade but lacked basebands. The Japanese firm, he says, recently entered the baseband market with W-CDMA basebands for Japan and plans to provide complete chipsets and PAs for the global market, something this deal with Nokia will go a long way towards helping with.
Worth noting also, says Entwistle, is that Renesas merged with NEC Electronics in April 2010 and most recently joined the Symbian Foundation.
The move could be an even better deal for Nokia, posits Entwistle, writing in his blog that Nokia has in the past transferred its 3G IC design operations to ST-Ericsson, licensed its W-CDMA/HSPA modem technology to Intel and collaborated with Infineon for LTE RF transceivers development. “This announcement raises a question whether Nokia will continue to own the IP and earn royalties for legacy basebands, GSM through W-CDMA / HSPA+” he adds.
Some firms won’t be thrilled at the prospect of this deal, however. Entwistle claims ST-Ericsson will probably be feeling the most hard done by, bringing into doubt the strong relationship ST-E has had with Nokia over the past three years. ST-E, explains Entwistle, has spent the last couple of years consolidating the 3G technologies it acquired from EMP and NXP with Nokia’s 3G IP into its flagship processor the U8500 which is expected to appear in handsets at the end of 2010. “Nokia will obviously be working with Renesas in future HSPA/LTE projects, thus potentially diluting the relationship with ST-E,” he said.
Qualcomm too may feel a bit slighted by the move, especially after the rather blissful honeymoon period the company has enjoyed with Nokia this year and last after resolving their IPR differences.