It may have only been a rumor on Monday morning, but the business world knew that unconfirmed reports that Qualcomm (NASDAQ: QCOM) was shutting down its Flo TV operations were true. The San Diego, California based wireless telecom company confirmed the inevitable yesterday, announcing that direct-to-consumer Flo TV device sales would be suspended immediately with current subscriptions to the service ending in spring 2011. While Qualcomm’s press release announcing the halt in Flo TV device production left open the possibility for the business to be reopened in the future, it’s looking increasingly unlikely that Qualcomm will bring their mobile televisions back to market.
Many were expecting Qualcomm to make an announcement earlier than the first week of October. CEO Paul Jacobs indicated during interviews at last summer’s D8 conference that while his company intended to keep their MediaFlo business operating for the foreseeable future, he was displeased with consumer uptake of the service as well as Flo TV handheld sales. Jacobs also reiterated that Qualcomm’s plans for MediaFlo were always to either spin the business off into a separate entity or simply to sell it. The CEO then told investors during the company’s July earnings report that Qualcomm had begun actively exploring options for their Flo TV operations. Canceling the service and handheld sales wholesale this week confirms that Qualcomm wasn’t able to find an interested buyer despite having estimated their Flo TV business was worth $2 billion.
Launched in 2004, the Flo TV mobile television technology was ahead of its time. Telecoms AT&T and Verizon adopted the technology and service early on, sensing opportunity in delivering television content to both their cellular phone and smartphone customers. Television networks also saw opportunity in the service, with company’s like Disney (NYSE: DIS) offering broad support from their cable networks like ESPN. While service stayed steady if not widely used between 2004 and 2008 when FLO TV launched direct to consumer devices and service, the technology was already becoming antiquated by superior Internet-based television options. The end of 2008 saw the proliferation of numerous Internet streaming and on demand services, with Netflix (NASDAQ: NFLX) launching its instant streaming service online and on Microsoft‘s (NASDAQ: MSFT) Xbox 360 at the end of that year while Disney, News Corp (NYSE: NWS), and General Electric (NYSE: GE) teamed up to launch Hulu. Flo TV equipped phones and devoted handhelds became less appealing as adoption of Apple Inc. (NASDAQ: APPL), Motorola (NYSE: MOT), and Research in Motion‘s (NASDAQ: RIMM) competing smartphones became widespread.
While online sales of Qualcomm’s Flo TV devices have ceased, they can still be found at retailers like Best Buy (NYSE: BBY). The company is rushing to get a customer compensation package in place. Qualcomm shareholders should be pleased that the company is moving forward from their Flo TV initiatives in a relatively strong state. Stock is trading at around $44.50 per share today, up 29% from the beginning of July when it hit a 52-week low of $31.63 per share. Analysts remain bullish on the stock as Qualcomm is building up its 3G network and killing off parts of their business that aren’t working.
As of this writing, Anthony Agnello did not own a position in any of the stocks named here.
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