Samsung buys chipmaker CSR's handset technology

By Paul Sandle and Hyunjoo Jin

Workers set-up a Samsung booth as they prepare for the 2012 International CES at the Las Vegas Convention Center in Las Vegas, Nevada, January 8, 2012.

Credit: Reuters/Steve Marcus

(Reuters) - Samsung Electronics Co has bought chipmaker CSR Plc's mobile phone connectivity and location technology for $310 million in a deal that strengthens the South Korean company's smartphone platform and patent portfolio.

CSR's chief executive Joep van Beurden said the British firm's Bluetooth, WiFi and location technology was cutting edge, but it was losing ground in smartphones to bigger rivals who were combining more functions in a single platform.

"There is a big war going on between the giants of the semiconductor industry like Qualcomm Inc, Intel and Samsung LSI to deliver the complete solution into smartphones," he said in an interview on Tuesday.

"Our team and technology - location and connectivity - is in its own right an extremely important part of that platform, but it is even more important if it completes your product offering and that is exactly what Samsung is doing."

Shares in the Cambridge-based group closed up 33 percent at 295 pence after reaching a 12-month high of 302 pence in the session, as analysts welcomed CSR's exit from handset chips.

"Disposing of the handset business where CSR has been struggling to remain competitive looks to be a good move," said Singer Capital Markets.

However, the deal sent shares in chip rival Broadcom Corp down 3 percent to $29.85 in Tuesday trading on Nasdaq as some investors worried that a combined Samsung and CSR would eat into Broadcom's business.

Bernstein analyst Stacy Rasgon said the deal would be "most negative for Broadcom" because it is a very large supplier of chips to Samsung.

Samsung said the deal would add more capability to its platforms featuring the application processors that power the world's most popular smartphones and tablets - Apple Inc's iPhone, iPad and its own Galaxy products.

"By leveraging CSR's R&D capability, Samsung will strengthen its application processor platform and solidify its position as a leading semiconductor solutions provider," said Stephen Woo, Samsung's president of System LSI Business, Device Solutions.

Brian Park, semiconductor analyst at Tong Yang Securities, said that up to now Samsung's growth in the mobile sector was driven by its strength in memory chips.

"With this development, Samsung has set up a foundation to bolster its non-memory capabilities," he said.

"Access to CSR's patents could also serve as a buffer in future patent disputes."

Samsung and Apple are waging legal battles in about 10 countries, accusing each other of patent infringement as they vie for supremacy in the mobile device market.

The company tops the mobile apps processor market in terms of revenue, controlling 72 percent in the first quarter, followed by Texas Instruments Inc with 12 percent and Qualcomm with 9 percent, according to data from Strategy Analytics.

CCS Insight analyst Geoff Blaber said Samsung's move came hot on the heels of the acquisition of Nanoradio, a Swedish WiFi chip set company, on June 1.

"It underlines Samsung's commitment to strengthening its vertical advantage by extending silicon capability most notably in WiFi and GPS," he said.

As well as buying CSR's technology and handset team, which numbers 310 employees, Samsung will also invest $34.4 million in a 4.9 percent stake in CSR at a price of 223 pence a share.

It will also take a worldwide royalty-free license of CSR's intellectual property for handsets and 21 U.S. patents, that will be licensed back to CSR.

Focus On Audio, Automotive

Van Beurden said CSR will keep the existing products and revenues, and could now focus its attention on areas where it was already winning, like voice and music and automotive.

CSR's position in handsets had faltered in recent years because few of its chips were in fast-selling smartphones, although it was trying to make up lost ground with a new WiFi Bluetooth combination chip.

It has had more success in its audio technology, where its technology is used in high-end headphones such as those made by Sennheiser and the "Beats by Dr Dre" range.

It will still be able to use technology in development, such as the combo-chip, in non-mobile applications, van Beurden said.

The British company said it would return up to $285 million to shareholders following the deal, which is expected to complete in the fourth quarter.

It also said current trading was "robust", with second quarter revenue at the top end of its guidance of $245 million to $265 million. For the third quarter, it expects revenue in range $260 million to $280 million, it added.

(Additional reporting by Tarmo Virki in Helsinki and Sinead Carew in New York; Editing by Stephen Powell)

Source: Reuters