Nokia, Sanyo Target U.S. CDMA MarketNokia, Sanyo Target U.S. CDMA Market

Nokia and Sanyo announced Tuesday that they will jointly form a separate company to pursue the CDMA2000 market and set up major operations in San Diego and Japan.

Traditionally weak in the CDMA2000 market, Nokia has been a dominant supplier in WCDMA, which operates best with the GSM European cell phone standard.

"We identified this new entity as the best way to create an attractive CDMA phone portfolio for our customers with the widest possible product offering at the high-end, mid-range and entry levels," said Olli-Pekka Kallasvuo, Nokia's president and chief operations officer, in a statement.

By placing a major plant in San Diego, Nokia will be bearding lion Qualcomm, the CDMA pioneer, in its den. Nokia and Qualcomm are engaged in bitter patent litigation over CDMA intellectual property. CDMA2000 has been on the rise in the U.S. and in some developing countries--precisely the regions Nokia is targeting with Sanyo.

Nokia and Sanyo said the new business is expected to begin operations in the third quarter of 2006 after final agreements between the two are signed in the second quarter. A Japanese newspaper reported that Sanyo would be the majority owner of the unit, but the report could not be confirmed.

Nokia indicated that it will draw on the strength of its 60 CDMA customers in global markets while Sanyo, noting that it has strong relationships with CDMA operators in the U.S. and Japan, pointed to its "leadership position in mid-range and high-end CDMA handsets." Sanyo has been under financial pressure in recent months and stock analysts hailed the deal with Nokia.

"This new company will also lead to raising our position in the global market," said Toshimasa Iue, Sanyo's president, in a statement.

Nokia's Kallasvuo added: "We estimate that the creation of this separate, associated company will provide Nokia with financial benefits from the start. It also offers both parties timely access to R&D competencies that complement their own internal strategies."

Press reports quoted Nokia executives as saying the new venture would employ about 3,500, although a few hundred would lose their jobs at Nokia.