Market Report: CSR gains as takeover hopes raised by US deal

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The Independent Online

With takeover activity in the technology sector heating up, CSR was propelled to the top of the FTSE 250 after hopes were raised over its potential as a merger-and-acquisition target.

The chip-maker climbed 27.4p to 377.7p following news from across the Atlantic that microchip producer Qualcomm had struck a $3.2bn (£2bn) deal to buy Atheros Communications, which specialises in wireless technology.

The acquisition led to analysts floating the idea that CSR could soon be the subject of a takeover attempt itself, with Espirito Santo Investment Bank saying it "increases the likelihood of someone... potentially bidding for CSR given [it] is the only other pure play connectivity chip provider".

Others agreed that it was good news for CSR, and Seymour Pierce's Ian Robertson predicted it "could drive share-price activity in the short term – leading the market to refocus on the discount [that] CSR trades to some of its peers". However, he did caution that the "read-across from Atheros to CSR is far from total", adding: "This deal could actually be seen as removing one of CSR's potential acquirors."

Meanwhile, its blue-chip peer, ARM Holdings, was going strong on the top-tier index after jumping up 33.5p to 471.4p. It was helped by expectations that its technology will be used in a number of key products announced at the annual Consumer Electronics Show, which opens today in Las Vegas.

In addition to this, there was the re-emergence of well-worn speculation that it could be the target of a takeover attempt from Intel, which was also being discussed as a possible bidder for CSR.

It looked early on as if the FTSE 100 was going to lose the majority of Tuesday's gains as it dropped below the 6,000-point mark, where it stayed for most of the morning. However, a rally later in the day – prompted by positive economic data from the States – meant the top-tier index finished on 6,043.86, an increase of 29.99.

It had little help from the miners, which fell along with commodity prices in the wake of an improving dollar. Antofagasta took the wooden spoon, sliding 36p to 1,586p, while African Barrick Gold – down 13.5p to 600p – and Anglo American – down 58.5p to 3,348.5p – were close behind.

Vague rumours around Amec, which market gossips were speculating is being lined up for a potential bid, did little to move the industrial services group as it edged up by 10p to 1,185p.

It was a big day for the retail sector, with both HMV and Next releasing updates that gave an idea of how much the extreme weather disrupted shoppers over the Christmas period. HMV lost 6.5p to 26p – a drop of 20 per cent – after issuing a profit warning in which it revealed a fall in like-for-like sales for December of nearly 14 per cent.

Meanwhile, Next's fourth-quarter trading statement blamed the snow for its sales figures narrowly failing to match expectations. Nonetheless the fashion chain managed to make 88p to close on 2,103p, with the company saying that it still expected to post a full-year pre-tax profit in line with forecasts.

For the rest of the retailers, there was some good news from John Lewis, which revealed that the last five weeks of 2010 saw department store sales up by nearly 9 per cent year on year. Yet Burberry still dropped by 22p to 1,120p, while Kingfisher and Halfords retreated 1.8p to 265.2p and 14.6p to 440p respectively.

On the FTSE 250, Taylor Wimpey was boosted up 0.69p to 32.8p as investors focused on the fate of its US unit, Taylor Morrison. A potential sale of the business has been speculated about for a while, and new reports emerged late on Tuesday that at least one bid has been made for the housebuilder.

It may have struggled after its flotation last July, but Ocado has lately been impressing investors. Yesterday the online retailer rose by 3.3p to 200p, meaning it has now booked gains of more than 12 per cent over the past two sessions. The group made the move up even as UBS cut its advice to "neutral", saying that the "strong recent run in the shares... means there is now insufficient upside to merit a "buy" rating".

It was a different story for another recently floated company, as Betfair was knocked back 34p to 937.5p. Morgan Stanley cautioned that it was "too early to play" with regards to the gambling group, which debuted on the market in October, saying that although it sees "significant upside potential in the long term... with short-term challenges continuing, we would wait to put fresh money to work."

On the Alternative Investment Market, Gulf Keystone was driven up 9p to 172.5p after it released an update from a well in northern Iraq, which it said contains a "massive" amount of resources. However, Matrix was cautious and kept its "reduce" rating, saying that the "fact that no test results were provided and (we can infer) the oil was viscous and heavy, suggests a low recovery rate."

Elsewhere, the small-cap explorer Hardy Oil and Gas plummeted by 38p to 178.5p following its announcement that it had abandoned a well in India.

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