The agreement, moreover, could sharply boost global purchases of wireless phones by hundreds of millions over the next five years, analysts estimate. There are about 300 million users of cell phones now.
Under the deal, the two companies will jointly support a single wireless transmission standard called CDMA (code division multiple access) and share access to patented technology, eliminating conflicts caused by competing and incompatible standards.
Stockholm-based Ericsson, once an ardent foe of CDMA, has also agreed to purchase the portion of San Diego-based Qualcomm's business that involves CDMA research and development and the manufacture of equipment on which such wireless networks operate. Terms were not disclosed, but Qualcomm said it would result in a one-time charge, the details of which it expects to release next month.
Shares of Qualcomm (QCOM) shot up 10 5/16 to 97 11/16 in early trading Thursday. Ericsson's (ERICY) U.S.-traded depositary receipts rose 1 11/16 to 22 3/4.
The two companies had been fighting for several years over which version of CDMA would be selected for the so-called "third generation" of digital wireless phones. The new standard will be able to handle the increasingly important and lucrative services of high-speed data transmission.
European manufacturers backed Ericsson, the world's third largest maker of wireless phones, and American firms generally sided with Qualcomm, which pioneered CDMA technology. The dispute even drew in heavyweight political figures from the U.S. and European Union, and no wonder: billions of dollars were at stake.
The standard agreed to, aptly called CDMA 3G, is supposed to be able to accommodate the three main global standards under which wireless phones operate. The other two are GSM, global system for mobile telecommunications, and TDMA, time division multiple access. GSM is widespread in overseas, while TDMA is prevalent in the U.S.
"With the resolution of 3G and the cross-licensing of our patents, Qualcomm and Ericsson have paved the way for the expansion of global CDMA-based wireless communications," said Irwin Mark Jacobs, chief executive of Qualcomm, in a statement.
The competing standards often make its difficult for wireless phone owners to use their devices anywhere in the world.
The International Telecommunications Union, a United Nations body entrusted with establishing standards for the telecom industry, still has to give its seal of approval to a new standard.
The ITU's main concern is that it be compatible with the billions of dollars of existing technologies and that other phone equipment makers and manufacturers have access to the new standard. Qualcomm and Ericsson say they will license essential patents for th CDMA 3G standard "to the rest of the industry on a fair and reasonable basis free from unfair discrimination."
"We are ideally positioned to support any operator anywhere in the world to migrate to 3G regardless of technology heritage or technology choice," asserted Sven-Christer Nilsson, chief executive of Ericsson.
The companies plan to hold a press conference later in the day in New York City.
By Jeffry Bartash, CBS MarketWatch