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Thoughts on Qualcomm’s Acquisition of CSR

What are the implications of Qualcomm’s acquisition of CSR should this deal be completed?

In this article, we consider the implications of Qualcomm’s proposed acquisition of CSR, should this deal be completed.

CSR’s Financial Health

The company is in good financial health; in the 12 months to 27th December 2013, CSR plc made an underlying operating profit of $104.3 million on revenue of $960.7m (c.f. $74.0m on $1,025.4m for the year to 2012). At the end of this period, the group had cash, cash equivalent, treasury deposits and investments of $306.2m (down from $333.3m for 2012).

During this same period, the main operating business, Cambridge Silicon Radio Ltd, made a profit of $60.2m on revenue of $921.4 million (c.f. $175.6m profit on revenue of $921.2m for the previous 12 months, but that year included a $258.9m windfall from the sale of part of the business to Samsung).

All this suggests that there was no financial imperative for the business to sell itself.

Qualcomm’s Rationale

From Qualcomm’s perspective, there are several benefits to the purchase of CSR; since it sold it’s handset business to Samsung, the remainder of CSR is a good (complimentary) fit with Qualcomm’s existing business, and the takeover would give Qualcomm a big boost in IoT (which is growing relative to the handset semiconductor market that Qualcomm already dominates). The purchase would prevent CSR from being taken over by any of Qualcomm’s rivals (such as Microchip who had already been in takeover discussions with CSR) and would reduce competition in the wireless semiconductor market.

Qualcomm would also gain CSR’s intellectual property (including it’s semiconductor patents and aptX audio standard), engineering teams, sales network and customer base.


While CSR is financially healthy, merging with Qualcomm would still hugely increase the scale of the business. This would help CSR to stay ahead of it’s rivals and to make the company better able to withstand the increasing commoditisation of it’s core technology areas. The boost to the resources available to CSR may also enable it invest more in developing compelling new products, buying out rivals, acquiring complimentary technology and boosting it’s market share.

A further potential benefit is that the combined company would have a market-leading position in the supply of Bluetooth® technology to both the mobile phone manufacturers and to the wireless accessory makers. By having this dominant position in both ends of the Bluetooth® connection, the company would be in a strong position to influence the technological development of the whole system, which could enable it to open up entirely new applications of the technology.

Of course, the flip side is that the acquisition would lead to reduced competition between the Bluetooth® platform vendors which could lead to increased prices and/or reduced innovation (as the need to out-innovate rivals to remain competitive would be reduced).

Financial Return and Investment

It’s not currently clear what RoI (Return on Investment) Qualcomm would expect to receive on the funds used to purchase CSR. However, there is a risk that they will be under pressure to extract a greater short-term financial return from the CSR business than an independent CSR would return to it’s shareholders. This would potentially mean pressure on headcount and reduced funds being available for R&D, leading to reduced levels of innovation.

Loss of Independence

Depending on the management structure that Qualcomm would put in place for the acquired business, there may be issues or concerns relating to the loss of independence and local control. For example, if the management structure becomes too top-heavy, the CSR business may become less agile and so less able to compete with it’s rivals. It may also have limits imposed on it in terms of it’s ability to acquire rivals or complimentary technology and to branch out into new areas of product development.

Staff Morale

Another potential impact of the loss of independence and local control would be a negative effect on staff morale and commitment to the company – especially of the staff based in Cambridge (which is currently the corporate headquarters as well as main R&D site). This would be further exasperated by any redundancies (which often follow takeovers), leading to the remaining staff feeling less secure.

Any such loss of morale or security, or any loss of commitment to the company, could lead to resignations which could, in turn, lead to a loss of competitiveness and innovation (especially if the senior engineers start to leave).

Innovative Edge

Historically, CSR has arguably been the most innovative developer of Bluetooth® platforms. As noted above, though, there are a number of ways in which this position would be threatened by a takeover by Qualcomm – possible reduction in spending on R&D, potential loss of key engineers or reduced levels of commitment to the business, reduced ability to recruit the best candidates, loss of business agility, etc.

On the other hand, Qualcomm may be willing to invest in the CSR business sufficiently that R&D is actually boosted and new areas of development are opened up that create new opportunities within the business for the staff, leading to improved morale and staff retention.

Customer Support

CSR have long been criticised for the poor level of support that they provide to all but their biggest customers. With their greater resources, Qualcomm could help to address this issue, for instance by improving the level of documentation available and better resourcing the customer support teams.

On the other hand, by becoming a small part of a big business, the CSR engineers could become even further removed from their customers than at present and support could get significantly worse. This could be especially true for CSR’s smaller customers; the scale of the combined CSR-Qualcomm business may mean that these customers are deemed to be too small to be worth bothering with, regardless of the possibility of these companies becoming future big customers.


CSR is currently headquartered in the UK and so is governed by UK (and EU) law. After a takeover by Qualcomm, the ultimate headquarters would be in the US and so much of CSR’s business may become subject to US law to a far greater extent than at present. To most customers, this is likely to make little difference, however for some it is a risk to be aware of.

Cambridge Effect

We consider here the local impact on Cambridge (UK) since we are also a Cambridge-based business.

Qualcomm would be unlikely to close CSR’s Cambridge office or make any major reduction in staff levels there as the existing team there is very competent and the CSR business is largely complimentary to Qualcomm’s. Their interest in buying CSR can thus be seen as a vote in confidence in the Cambridge technology cluster.

There will, however, be concerns about yet another of Cambridge’s (and the UK’s) big technology companies being bought out by a foreign business; it’s a further reminder that we are very good at R&D but not at capitalising on it.


There would be a number of benefits to Qualcomm’s purchase of CSR but there are also many risks too. The balance between the two will only become clear in time.