NextWave buys IPWireless for up to$235M

NextWave announced that it will acquire IPWireless for $100 million at closing, $25 million in cash and $75 million in NextWave stock. The pricetag could reach $235 million based on revenue milestones through 2009. IPWireless has developed UMTS TD-CDMA technology as well as its own mobile TV technology, tdTV. IPWireless has raised more than $200 million since its founding in 1999, including about $14 million from Sprint Nextel. IPWireless will join NextWave as a wholly owned subsidiary, much like GoNetworks, which NextWave acquired recently for its WiFi technology. NextWave is also a huge proponent of WiMAX, which makes the IPWireless acquisition somewhat surprising to many in the industry, given UMTS TD-CDMA seeming rivalry with WiMAX.

"The mission at Nextwave is to develop technology and products that meet the needs of our customers: We're customer driven," EVP of Marketing and Communications Roy Berger told FierceWireless. "Different customers have different needs, and while we are totally committed to WiMAX technology, we went out and acquired GoNetworks for its mobile WIFi product and now we've acquired IPWireless with its TD-CDMA. From our perspective, this acquisition allows us to be even more customer-driven, by fulfilling every potential customer need."

Sprint Nextel was considering IP Wireless' TD-CDMA technology for its 4G network buildout (hence the $14 million investment), but the carrier ultimately chose WiMAX. IPWireless needed a partner given the fact that it lost out on the Sprint Nextel deal, and since NextWave just did a $350 million private placement after going public last summer they seem to have the cash handy. While Berger's explanation above regarding IPWireless' seemingly disparate technology being an asset for a customer-driven company like NextWave certainly holds water, others have likened NextWave to Qualcomm, as it scoops up intellectual property from firms like GoNetworks and IPWireless as well as announcing plans to develop WiMAX chipsets.

Current Analysis' Peter Jarich noted that the company's investors might end up with little more than they put into the company: "NextWave could be paying up to $235 million for a company that's raised $200M. The investors are getting basically what they put in, if that." Jarich said he thinks the reason we're not seeing multiple gains on that investment is that IPWireless has had trouble getting an ecosystem formed. "Their technology TD-CDMA reached standard status, but not one that is used widely or accepted," Jarich said. "IPWireless has a nice handful of marquee wins, but the missed opportunity with Sprint obviously hurt them big time." IPWireless' tdTV technology has a lot of potential, according to Jarich. "But there are lots of great technologies out there, if you don't get the support behind it and the momentum behind it, it goes nowhere." The ecosystem is key for any new technology, but "I'm not sure how NextWave can change that" for IPWireless, Jarich said.

Berger sees a lot of integration and opportunity for IPWireless at NextWave: "There's going to be an extremely valuable intersection between what IPWireless is doing with TD-CDMA and NextWave's WiMAX initiatives that will enhance both TD-CDMA and WiMAX," Berger said. "Also, IPWireless just completed a highly successful trial of its mobile TV technology with four of the major European carriers...our PacketVideo subsidiary makes subscriber multimedia client software, and the marriage between that software and IPWireless' tdTV will ultimately result in a superior product for our customers."

For more on NextWave's acquisition of IPWireless:
- see this press release