© The Financial Times Ltd 2014 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
Last updated: July 27, 2011 9:00 pm
CSR, the Cambridge-based chipmaker, warned of “increasing economic uncertainty and weakness in some areas of the handset market” as it reported a slide in revenues for the first half of the year.
Group turnover fell 9.1 per cent to $357.8m in the period, with revenue from the handset business – primarily derived from sales of Bluetooth chips – down by more than a fifth. However, the shares rose as the results proved better than the most pessimistic expectations. “It could have been a horror show,” one analyst said.
Pre-tax profit fell 62 per cent to $8.5m, but the company said there had been an improvement in the second quarter when one-off items were stripped out.
“Our business has been resilient in the second quarter, with underlying operating profit reflecting the strong gross margin and our lower operating expenses,” said Joep van Beurden, chief executive. CSR was making progress in diversifying its revenue base, he added, with almost two-thirds of sales now coming from other areas such as audio semiconductors and chips for use in car navigation systems.
He said the company expected to complete the $484m acquisition of Zoran, the US technology group, in the third quarter. CSR cut its offer from $679m last month after a sales warning from Zoran. The takeover has met an unenthusiastic response from investors: CSR’s shares fell nearly 10 per cent when the proposed deal was first announced in February.
However, Mr van Beurden insisted that it would “bring us strategic benefits“, and that “the response we’ve had from our shareholders has been positive”.
Analysts welcomed the second-quarter revenue of $193.9m, which was ahead of the consensus forecast of $191m. They said the company’s revenue guidance of $200m-$220m for the third quarter was disappointing, however.
Alex Jarvis, at Peel Hunt, said CSR had proved relatively resilient during a “torrid time” for the semiconductor industry, but added that the Zoran acquisition had added to investors’ doubts about the company. While the shares were among the cheapest in the sector, she said, “investors may have to wait twelve months for a turnaround”.
The company will begin mass production next year of a new chip that combines Bluetooth and Wifi functions, and expected this to help CSR break into the smartphone market. CSR chips are used in only one smartphone – Samsung’s Galaxy SII model – and its handset division derives most of its income from selling chips for downmarket “feature phones” produced by companies such as Nokia, which has suffered falling sales.
Eoin Lambe, at Liberum Capital, said Mr van Beurden had done well to develop CSR’s business beyond handsets. “Without that diversification, they would be in a lot of trouble right now,” he said. But the company may have temporarily “missed the boat” through its hesitation in moving into smartphones, he added. “It’s a generation behind some of its peers.”
Earnings per share declined from 9 cents to 6 cents.
Copyright The Financial Times Limited 2014. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.
Sign up for email briefings to stay up to date on topics you are interested in