Bluetooth boom gives CSR shares a boost

Shares in CSR, the bluetooth technology specialist, surged to an all-time high yesterday after it raised hopes that up to 40 per cent of mobile phones sold in 2006 will use the short-range transmission technology.

The share price closed at 1,413p, up 17 per cent. CSR's value has almost tripled over the past year to £1.7bn. The Cambridge-based company was floated in March 2004 at 200p, giving it a market valuation of £240m.

CSR (Cambridge Silicon Radio) specialises in bluetooth technology which enables mobile phones, mobile phone accessories, computers and other consumer devices such as gaming consoles to transmit data wirelessly over short ranges. Its technology is built into semiconductors within such electronic gadgets - though not iPods - as well as accessories such as bluetooth headsets.

The company competes against the likes of Broadcom and Texas Instruments of the US. During the first quarter of 2006, CSR had a 46 per cent market share in mobile handset design wins and took 60 per cent of the overall new design market.

New design wins do not immediately help the company's financial results but point to future revenue progress. The technology is predominantly used for mobile phones connecting to accessories such as wireless headsets.

Although its shares have surged over the past year, analysts said they were not concerned that the company's valuation is outpacing its prospects. Dan Ridsdale, of Bridgewell Securities, said: "The share price rise isn't enormously scary and there could be more upside to come." He said he would not be surprised if the shares closed in on 1,500p, a 10 per cent upside to the current level. UBS, the Swiss investment bank, said its 1,450p price target values CSR in line with the overall semiconductor sector.

CSR said that between 35 per cent and 40 per cent of mobile phones sold in 2006 would have bluetooth. As a result, CSR expects the bluetooth market to grow up to 70 per cent this year. That equates to up to 539 million units, up significantly from the 317 million units shipped in 2005.

The global mobile phone market has grown rapidly in 2006 with emerging markets driving higher volumes. However, CSR's chief executive, John Scarisbrick, only appointed in March, said it is the sales of high-end multimedia phones in mature markets which benefit CSR.

Mr Ridsdale said that the volume of mobile handsets with embedded bluetooth is the key variable in its valuation model.

As a result of the more bullish outlook and assuming 38.5 per cent of mobile handsets sold this year will have bluetooth embedded, the broker raised its 2006 earnings and pre-tax profit forecasts by 22 per cent to $193m.