Shares in CSR rose 17 per cent on Tuesday after the maker of Bluetooth wireless chips said increasing demand for hands-free mobile phones helped more than double first-quarter profits.

The Cambridge-based company is the market leader in Bluetooth technology, a short-wave radio link that allows devices such as mobile handsets and headphones to connect to each other without wires.

CSR beat market expectations on Tuesday when it said revenues more than doubled year-on-year to $134.9m (£73.4m) for the three months to the end of March, while pre-tax profits rose 136 per cent to $24.8m.

John Scarisbrick, the company’s new chief executive, said legislation for hands-free mobile phone use while driving – particularly across several US states – was pushing up demand.

The company raised its forecast for worldwide sales of Bluetooth-enabled phones. It now expects up to 40 per cent of all handsets sold globally in 2006 to have a Bluetooth chip.

This marks an increase from a previous forecast of up to 35 per cent and represents rapid growth over the past two years. In 2004 only 14 per cent of handsets used Bluetooth technology, rising to 25 per cent in 2005.

Mr Scarisbrick acknowledged that the market for selling Bluetooth chips to mobile handset manufacturers was extremely competitive but said CSR was being selected for 46 per cent of new designs, more than double the number of its nearest competitor.

Overall, the company has about a 60 per cent share in the market for Bluetooth chips.

In addition to mobile phones, the company is expecting to see demand from the portable music player market where there is growing interest in connecting wirelessly to headsets.

“Apart from being iconic, everything else about that white wire is annoying – it tangles in your purse and pocket,” said Mr Scarisbrick, referring to Apple’s iPod music device.

The company expects the overall Bluetooth market to expand between 60 and 70 per cent in 2006.

CSR is also developing chips to allow portable devices to connect through longer-range wi-fi technology, although revenue from this business is expected to be “modest” until 2007.

Earnings per share rose from 6 cents to 15 cents. There was no dividend.

Shares in CSR, which have more than quadrupled in value over the past year, on Tuesday climbed 204p, or 17 per cent, to close at £14.13.

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