Research Note

June 2022 Qualcomm’s “not-so-wize” investment in Cellwize

June 2022

Abstract

We guess, you heard about the deal: on June 13, 2022, Qualcomm announced the acquisition of centralized self-organizing network (C-SON) specialist Cellwize for an undisclosed amount. Although superficially attractive, the rationale for the deal does not stand up to close examination. Unlike the media crowd, we believe this deal is a bailout, a “cashing in,” or some other kind of an investor’s gentleman’s agreement, disguised as a strategic positioning in the incipient O-RAN Alliance-led service management and orchestration (SMO) market for both public and private wireless networks.
• Bailout for 2 reasons. Firstly, the SMO market is tied to the open RAN market that will not materialize in a significant way until 2025, which means many startups need sufficient cash on hand in the next few years to sustain their activity in the O-RAN Alliance, TIP and 3GPP along with many trials across the globe (see our open RAN report). And secondly, Cellwize’s sustainability is ensured, and its Tier 1 telco clients are reassured that they can continue to use or test Cellwize’s CHIME platform.
• “Cashing in” because typically, after being locked in for 10 years, investors look for an exit strategy to cash in and the nature of this is exactly what it is.

Don’t get excited, this is a small deal after all:
1. Since its inception in 2012, Cellwize only rose a total of $56.5M in 4 rounds, including Qualcomm Ventures’ $32M investment in November 2020 that made it the largest investor accounting for 57% of the total. As a rule of thumb in this C-SON business—in which we have been involved in since its takeoff in 2010, the undisclosed amount should be somewhere between $250M and $350M. Put another way, this is a tiny drop in Qualcomm’s ocean of $33.6B revenue—as reported for full year 2021. And for investors such as Deutsche Telekom Capital Partners (DTCP), Intel Capital, Samsung NEXT, Sonae IM, Verizon Ventures, Vintage Investment Partners, Viola Credit, Viola Ventures, and VMware, it’s nice cash to have on hand to make new investments during the upcoming recession. Interesting timing, isn’t it?
2. A small opportunity arises. Cellwize is a C-SON player with less than 10% market share in a $1B+ global market led by Nokia, HCL Technologies, Huawei and Ericsson, in that order, all 4 players have each more than 10% market share. Figure 1 illustrates the value of the market segments Qualcomm is heading into, they are not going to move the needle!

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