At last, the stock market buys into CSR's vision of an integrated future
The 14% fall in the share price of Bluetooth specialists CSR plc (CSR.L) shouldn't obscure the fact that the company in the heart of the Cambridge high tech Cluster has been rerated by the stock market in the past few months.
There has been a spreading recognition that Bluetooth technology is not only here to stay but that its future is rosy.
The company's shares ended Friday at 1293p each. That was down 219p on the week, presumably in sympathy with the general slide in the markets that saw the FTSE 100 down 109 points and perhaps some investors were locking in some exceptional profits.
Consider that a year ago it was at 372p. In the past 12 months it has gone from a £480m company to a £1.7 billion one and in the process recently it overtook chip designer ARM Holdings as the largest high tech company headquartered in the Silicon Fen.
No 1 in the market
CSR is ranked #1 in every Bluetooth market segment with a unit market share of over 50%. But until not too long ago, CSR was seen to be mining a strong, but essentially narrow, short term seam of business. Manly analysts believed Bluetooth technology, which suffered a couple of early stutters, would be confined to earpieces for mobile phones and would eventually be swamped by WiFi.
CSR says its leading position has been won by a unique approach to chip design based on high integration, providing convincing, keenly priced performance to equipment makers, mostly so far in mobile phones. And rather than compete with WiFi, it has embraced and integrated it - starting in November 2004 - into its chip architecture.
Clearly the company must be doing something right. But the real buzz around CSR has been sparked by the realization that Bluetooth technology's potential has been underestimated.
Bluetooth got a belated but enduring boost from the auto industry as government regulators insisted on hands-free mobile phone use in cars and as carmakers started building in microphones and speakers that could connect to a handset via Bluetooth.
This in turn sparked consumer interest and mobile phone customers started asking for Bluetooth. Phone manufactures saw a way to get extra value out of sales because the cost of Bluetooth technology had come down. Its adoption was cheap for them, but customers were prepared to pay a nice little premium.
New applications
Then Bluetooth started to spread to other applications. Apart from the obvious extensions into motorcycle helmets and sunglass frames, other new uses include stereo wireless headphones for use with MP3 players and connecting MP3 players to in-car stereo systems. Later this year next-generation video-games consoles will be using Bluetooth,
In 2005 60% of Bluetooth chips went into mobile handsets and 15% into wireless headsets, according to iSuppli, a market-research firm. The rest went into other devices, from laptop computers, keyboards and mice to Bluetooth-enabled clothing.
And suddenly it's WiFi that needs to catch up. Sales of Bluetooth devices more than doubled last year to 320m units and are forecast to be over 520m this year, far outstripping sales of WiFi chips.
Earlier this year, the Bluetooth Special Interest Group, the collaborative association that guides the development of the technology, agreed that the next (3.0) version of Bluetooth will be based on ultrawideband (UWB) radio technology, which allows for data-transfer rates hundreds of times faster than is possible now. With even lower power consumption, it will, for example, enable the transfer of music to MP3 players, or of photos or video from digital cameras to televisions, without wires.
CSR co-founder and Chief Technical Officer James Collier (pictured) said at the time that UWB is the next logical step for Bluetooth development. "The ability of CSR's technologies to optimise interoperability across devices and proven coexistence with GSM, WiFi, and Bluetooth technologies, will continue to be the key to CSR's solutions."
The integration with WiFi, will, the company says, provide "extremely large opportunities".
With a price earnings ratio now set around 32, it looks like investors share that vision too.
John Tilston
12th June 2006
