Qualcomm suspends Flo TV sales

NEW YORK Tue Oct 5, 2010 5:34pm EDT

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NEW YORK (Reuters) - Qualcomm Inc is suspending direct consumer sales of its mobile television service and devices as it looks for strategic options and plans lay-offs for its Flo TV business, which has failed to take off.

The chip company, which built a network and set up the service to kick start demand for mobile media services, said in July that it would examine its strategic options for the business due to disappointing sales.

In recent years Qualcomm spent $683 million on airwaves to build the network. It has never released financials for the service but had estimated when it started constructing the network that it would cost about $800 million to build.

The company also developed a pocket-sized TV which it started selling in U.S. retail stores last year for $249.99 including six months of service. The device was no longer listed on Best Buy's online store on Tuesday.

Qualcomm, which provides the mobile TV service through the top U.S. operators AT&T Inc and Verizon Wireless, said it expects some lay-offs as a result of the decision but would try to redeploy some workers.

The company said it expects to keep the network running so that current Flo TV customers would be able continue to receive the service into the spring. It did not say what it expects will happen beyond spring but promised to make appropriate refunds in the event the service is discontinued.

It said that service provided to phones purchased by the wireless operators was not affected at this time.

Carriers never really promoted the service heavily and analysts blame its failure to attract U.S. consumers on its $15 monthly service fee, which they deemed too heavy an addition to phone bills for consumers who wanted to try out the service.

Some analysts have questioned whether Qualcomm would find a buyer for the broadcast network and say its best bet may be to sell the spectrum.

Qualcomm said it has talked to a wide range of partners about the spectrum and the network and is "seeing strong interest in using the FLO TV network or spectrum."

It said the interest stems from the increase in popularity of mobile data services in recent years and the emergence of devices such as tablet computers, a market Apple Inc kick-started with iPad earlier this year.

Qualcomm shares closed up 37 cents at $44.26 on Nasdaq.

(Reporting by Sinead Carew; Editing by Leslie Gevirtz and Richard Chang)

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