Bangalore Zoom Technologies Inc signed a licensing pact with chipmaker Qualcomm Inc, allowing the Chinese mobile phone maker to develop and sell 3G devices using Qualcomm's chip patents, sending its shares soaring as much as 64 percent.
Zoom's Nollec Wireless unit will develop the products for the Chinese market and pay royalties to Qualcomm at standard rates, the companies said.
Qualcomm's chips are used by mobile device makers including Apple and HTC.
"With this (chips) we will make smartphones ... the smarter the phones higher the margins," Zoom Chief Financial Officer Anthony Chan told Reuters.
Zoom plans to launch the new phones in China under its Leimone brand by summer this year and expects sales of these devices to show up in its third-quarter results, Chan said.
"Our own products enjoy margins of 10-15 percent where as the OEM products have margins of 6 percent," Chan said.
Original equipment manufacturers, or OEMs, make products for larger companies to be branded and marketed by them.
Sales from Zoom's Leimone phones -- its line of mobile phones sold through Chinese national carriers -- contributed almost 19 percent to its top line last year.
Zoom will make some types of CDMA smartphones running on the Android operating system, targeting Asia and Europe.
Code Division Multiple Access, or CDMA, technology allows many signals to occupy a single transmission channel, optimizing the use of available bandwidth.
Zoom will expand to North America and European markets with these products by the end of 2011, Chan said.
The company sells phones to major Chinese carriers such as China Mobile, China Unicom and China Telecom.
Shares of Beijing-based Zoom rose were up $1.12 at $4.22 in afternoon trade on Nasdaq. They touched a high of $5.08 in early trading. About 9 million shares changed hands by 1300 ET, four times their normal trading volume.
(Reporting by Rachana Khanzode; Editing by Gopakumar Warrier)