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In $2.5B Deal, Qualcomm & CSR Mesh

2014-10-17 PM 4:47

News From: EE Timesback to list

MADISON, Wis. — Qualcomm Inc., the world's largest cellphone chip vendor, has agreed to buy CSR for ₤1.57 billion ($2.5 billion) to strengthen its presence in the Internet of Things.

CSR, a pioneer in short-range Bluetooth-based wireless connectivity, develops voice and audio processing tools used in portable, automotive, and wearable devices. Most recently, it devised CSRmesh, a Bluetooth-based mesh technology described by some observers as a potential ZigBee killer.

Qualcomm would pay 900 pence ($14.37) a share for CSR, a 56.5% premium on the share price before the start of the offer period in August. The all-cash offer was announced Wednesday just hours before a deadline imposed by UK regulators for Microchip Technology to mount a fresh bid for CSR.

In August, Microchip disclosed that it was negotiating a deal with CSR. However, CSR rejected Microchip's overtures, saying its offer was too low. (That price was not disclosed.)

Qualcomm's $2.5 billion offer could trigger other bids for CSR, now that a firm price is out in the open. However, financial analysts appear to believe that only a handful of semiconductor companies could afford to complete with Qualcomm.

Qualcomm looks beyond mobile
Dan Ridsdale, an analyst at Edison Investment Research, called the move "a surprise offer" in a research note. "The offer was unexpected because Qualcomm acquired connectivity technology through the 2011 acquisition of Atheros."

However, Atheros' technology has mainly been embedded in mobile handsets alongside Qualcomm's radio and processor solutions, he wrote. "With growth in the smartphone market running out of steam, Qualcomm needs to look for new avenues of growth, and CSR provides this connectivity technology for the plethora of devices which require connectivity to participate in the 'internet of things' mega trend. CSR's indoor location technology may also be of interest."

Ridsdale agreed with other financial analysts that, "given that the offer is recommended and that other players are unlikely to be able to match Qualcomm's firepower, we see a counter offer as very unlikely."

CSRmesh at play here?
The marriage between the dominant global mobile chip vendor and CSR, which has a solid track record in pioneering Bluetooth technologies focused on cellphones and connected cars, seems like a good fit.

If the deal goes through, CSR would gain immensely in scale while fighting off the danger of obsolescence posed by competing chip vendors integrating Bluetooth technologies into their SoCs.

Classic Bluetooth and Bluetooth Low Energy chips are quickly getting commoditized, but CSR is a pioneer of the short-range wireless technology and is now pushing CSRmesh, a ZigBee-like mesh technology built on Bluetooth. CSR sees CSRmesh as a linchpin for its foray into the IoT market.

"CSRmesh is a proven technology that allows for an almost unlimited number of Bluetooth Smart-enabled sensors, beacons, and other devices to communicate in a mesh network and be controlled directly from a single smart device for the first time," Rick Walker, marketing manager for IoT at CSR, recently told us.

He stressed that CSRmesh isn't a separate protocol from Bluetooth Low Energy. "It actually is a software layer that sits on top of it to extend the possibilities of Bluetooth Smart communications."

While acknowledging that CSRmesh isn't standardized yet, Walker said that a Bluetooth Smart Mesh group has been established in the Bluetooth Special Interest Group. "Our goal is for the community as a whole to be able to take advantage of CSRmesh capabilities to improve the IoT."

In theory, Qualcomm could become a much needed ally for CSRmesh.

Meanwhile, Qualcomm also is keen on establishing itself on the IoT market. In May, it agreed to buy Wilocity, a maker of wireless HDMI connections. Qualcomm developed AllJoyn, an open-source platform designed to let devices to share information with other nearby devices.

— Junko Yoshida, Chief International Correspondent, EE Times Circle me on Google+

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