Signing one of its largest ever pacts, CommQuest Technologies Inc. said it will supply its GSM-XL chipset to Audiovox Communications Corp. for a new Global System for Mobile communications handset.
Terms of the agreement call for CommQuest, a recent IBM Corp. acquisition, to supply its Total System Solution to Shintom Co. Ltd., which will manufacture the GSM handsets to be distributed under the Audiovox brand name. Immediate plans call for the development of a 900 MHz GSM handset, which should enter production during the fourth quarter.
The agreement also includes TALK Corp., a joint venture of Audiovox and Shintom, which is the exclusive development and marketing arm for products manufactured by Shintom.
Future plans for developing next-generation dual-band and tri-band handsets also are included in the agreement.
Since being acquired by IBM in February, CommQuest has signed a series of agreements for its Total System Solution, including deals with SOS Wireless Communications, Korean electronics manufacturer Sewon Telecom and Truly Telecommunications Co. Ltd. CommQuest also signed a strategic support center agreement with Hong Kong-based Telecom Technology Centre.
A tier-two handset player, Audiovox has had success in the analog phone market, with more than 10 million analog handsets sold to date.
“On the analog side, [Audiovox has] always been in the top five,” said Phil Redman, senior analyst, wireless/mobile communications at the Yankee Group, Boston. “It’s been a successful market for them. They came in as a price leader, and they offered a lot of accessories.”
The company this year, however, began to feel the squeeze as the market started a shift from analog to digital technology, and it has taken several steps to build a digital line-up.
Early this year, the company introduced its fist dual-mode Code Division Multiple Access cellular phone, the CDM-3000. The company also announced plans to introduce a Time Division Multiple Access phone by mid-year, but it now says its TDMA product will be available during the fourth quarter. The TDMA handsets are being developed through a partnership with Kokusai Electric Ltd.
In April, Audiovox made its first foray into the GSM market when it signed a distribution agreement with Bosch Telecom. Under the agreement, Audiovox has distribution rights in the United States and Canada for Bosch’s World-Com 718 GSM phone for personal communications services networks.
With more and more wireless carriers aggressively pushing digital services and personal communications services enjoying better penetration than expected, demand for digital handsets is on the rise. Analysts say demand for CDMA handsets is high, and the GSM handset market needs more competitors.
But the digital arena has proved to be difficult for some handset manufacturers. Northern Telecom Inc. recently announced its exit from the GSM handset business, and Siemens Wireless Terminals scaled back its efforts on CDMA to focus on GSM handsets.
Some analysts say trying to develop handsets for each digital technology can spread manufacturers’ resources too thin. But Audiovox, which doesn’t physically manufacture its own handsets, has bought chipsets for its digital products rather than spending money to develop its own.
“Without your own chipset, though, it’s hard to be a price leader,” said Redman. “[Audiovox is] coming in with no market share and not a lot of experience. If they can put out a low-cost phone, they might have success. Cost will be very important.”
Audiovox reported somewhat disappointing results for the second quarter ended May 31, with a net loss of $4.7 million attributable to inventory mark down.
“The shift in the U.S. market from analog to digital was not unexpected and we had planned our inventory purchases accordingly,” said Philip Christopher, president and chief executive officer of Audiovox Communications. “Were it not for a software problem in one of our volume analog models, we would currently have normal analog inventory levels.
“The company has incurred a charge to the existing analog inventory to bring it in line with the current pricing, which has been under pressure from the growing digital presence in the market,” continued Christopher.
