Bluetooth firm surprises with growth forecast

The UK firm whose chips appear in more than half of all Bluetooth headsets and devices delighted investors today by admitting it had under-estimated demand for the wireless technology.

The UK firm whose chips appear in more than half of all Bluetooth headsets and devices delighted investors today by admitting it had under-estimated demand for the wireless technology.

More than £250m (€364m) was added to the value of CSR after it said the Bluetooth market could grow as much as 70% this year compared with its earlier estimate of up to 60%.

Announcing that pre-tax profits had more than doubled to $25.8m (£14m/€20.4m) in the first quarter, CSR added that it had won more than 60% of all orders for Bluetooth designs globally.

Bluetooth enables people to communicate over short distances by radio link, meaning they do not have to clutch their mobile phones to their ears.

Chief executive John Scarisbrick said orders for Bluetooth technology were also being driven by mobile phone firms offering customers more services on the handsets.

These include the ability to listen to music from commercial radio stations and the transfer of data from PCs to mobile phones without the need for wires and cables.

“This buoyant marketplace and our increasing visibility of our customers development programmes make us confident of delivering a strong financial performance for 2006,” Mr Scarisbrick said.

Revenues doubled to $134.9m (£75.8m/€73.3m) between January and June, while operating margins reached 18% compared with 15.5% a year earlier.

Business picked up after the seasonal lull between Christmas and Chinese New Year, with the firm winning designs in eight Samsung mobile phones and three Nokia handsets.

In addition to phone handsets and headsets, Bluetooth also features in a host of products ranging from laptop computers and personal digital assistants (PDAs) to printers.

The technology is also cropping up in expensive cars and CSR said it had won 78% of designs for the automotive sector including the TomTom Go satellite navigation system.

Shares in CSR surged 17% today to value the company at around £1.73bn (€2.5bn) - five times higher than when it listed on the stock market in February 2004.

Robert Lea, of broker UBS, said guidance for sales in the second quarter of up to $185m (£100.7m/€146m) or 95% above last year was substantially higher than his estimates.

He said: “We believe Bluetooth has generated a degree of brand recognition that has encouraged consumers to seek out devices that are Bluetooth enabled.

“Consumers currently appear willing to pay a premium for this additional functionality.”

But he worried that the high margins that CSR was enjoying would attract the attentions of US technology giants such as Texas Instruments and Broadcom.

“The key risk is that Bluetooth becomes a victim of its own success as its market penetration increases, leading to a commoditisation of the technology,” Mr Lea said.

CSR employs 719 staff at its Cambridge headquarters and other offices around the world including the United States, Japan, China, India, France and Sweden.

Bluetooth is a trademark owned by a trade association called the Bluetooth Special Interest Group (SIG) whose members include Microsoft, Toshiba and Ericsson.

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