Big jump in CSR profits as Bluetooth shipments surge
Bluetooth chip specialists CSR plc (CSR.L) today reported that revenue for the first half of the year almost doubled while pre-tax profit increased by 128% to $69m as the market for Bluetooth chips grew by around two thirds.
CEO John Scarisbrick (pictured) said: "We have achieved a record first half year for revenues, profits and operating cash flow. The results reflect the growth of the Bluetooth market, the strength of CSR's position and our ability to maintain margins".
The Cambridge-based company shipped over 100 million units in the first six months of the year, which represents around one third of the total Bluetooth shipments it has made since it set up shop in 1999.
"We continue to see significant opportunities in the Bluetooth market, with estimates ranging from 500 to 550 million unit shipments for the whole of 2006, compared to 317 million units in 2005", Mr Scarisbrick said.
"This rapid growth is being driven by increasing attach rates in the important mobile phone segment, where CSR is well positioned, as well as the continued adoption of Bluetooth in non-cellular applications".
First half revenues reached $317.3m, compared to $161.1m in IH 2005. The operating margin increased to 20.9% from 18.1%, which delivered an operating profit of $66.2m that was more than double the $29.1m achieved in the corresponding period in last year.
CSR spent $49.2m on R&D in the first half, 15.5% of total revenue, compared to $23.0m and 14.2% of revenue in 1H 2005.
The stock market responded by bidding up the share price by 4% to 1134p, valuing CSR at around £1.35 billion.
Marketplace
CSR expects the global Bluetooth market will grow at between 60% and 70% this year over 2005's 317 million unit shipments, driven by higher attach rates in mobile phones and the development of new applications. It expects the attach rate in mobile phones to grow by between 35% and 40% this year (2005: 25%). Design activity as listed by the industry continued to be strong in Q2 with 261 end products and modules qualified compared to 186 in Q2 2005, an increase of 40%.
The company said particularly strong design activity was seen in the mobile phone segment where competition is most active. There were 100 product qualifications in Q2 compared to 49 in Q2 2005 and Bluetooth is starting to be adopted in lower end phones as well as in the high- and mid-ranges.
The segmentation of the headset market continues to increase from very high-end headsets with full feature functionality to low cost headsets with lower functionality. More mobile phones are now being designed to support Bluetooth stereo audio streaming. Design activity to incorporate Bluetooth into stereo headsets for use with mobile phones, MP3 players and PCs is beginning to gain traction as consumer adoption of stereo headphones increases, the company said.
The adoption of Bluetooth in the automotive sector has increased, with the attach rate in new cars now 6%. It is expected to increase further as hands-free legislation is comes into force and as car makers incorporate Bluetooth into mid-range models.
It maintained its leading position in the Bluetooth market. It recorded a landmark 1,500th design win and its design win market share remained at 60% plus where it has been pretty much since it started business. Its closest competitor has less than a fifth of its number of design wins.
It had a higher design win rate in the second quarter in sectors other than the dominant mobile phones. In stereo headsets, it recorded 75% of available wins. In the PCs, it notched up 63% of all design wins, including 100% in the laptop segment. It won 77% of all automotive designs and 86% in the consumer segment.
Outlook
CSR expects the strong 2Q performance of Bluetooth chip shipments into the handset and headset segments to continue into the second half of 2006.
As a result, the Board said it "expects an acceleration of revenues in the third quarter to between $225m and $240m. Fourth quarter revenues are expected to be at a broadly similar level to those in the third quarter, reflecting the established seasonal slowdown in shipments anticipated in the latter part of the fourth quarter".
26th July 2006
