As the growth of the smartphone market continues to reach an asymptotic peak, large chip makers have turned their attention to other sectors, like the automotive and household industries. Qualcomm, a US wireless technology company and one of the largest chip makers in the world, is pioneering this shift by buying the British chip maker CSR for $2.5 billion in a deal announced on October 15th. In doing so, Qualcomm’s motivation is to refocus on the growing demand to connect every conceivable tool to the Internet—including everyday devices like refrigerators, washing machines, and cars—as part of a concept known as the “Internet of Everything.”
In a statement following the acquisition, Qualcomm chief executive Steven M. Mollenkopf asserted that “the addition of CSR’s technology leadership in Bluetooth, Bluetooth Smart and audio processing will strengthen Qualcomm’s position in providing critical solutions that drive the rapid growth of the Internet of Everything, including business areas such as portable audio, automotive and wearable devices.” Qualcomm reported that CSR’s board unanimously backed the deal that would pay CSR shareholders £9 a share for their holdings, representing a 27 percent premium on CSR’s closing share price.
But problems may arise following similar deals that have been called into question as tax inversion deals. It has been speculated that Qualcomm approached CSR when news leaked that their biggest competitor, Microchip Technology, unsuccessfully attempted to acquire CSR in what many considered to be a tax inversion deal.
To combat inversions, the US Treasury recently adopted new rules that eliminate some of the incentives for US companies to move their domiciles abroad in hopes of reducing their tax burdens. Just one day before Qualcomm’s acquisition was announced, the measures effectively torpedoed the $54 billion acquisition of UK’s Shire PLC by US-based AbbVie Inc., two global pharmaceutical groups. The takeover would not only have been the largest of the year, but would have also established a new “high-water mark for so-called tax inversions” as the largest such deal in history.
Qualcomm already has 400 employees in the UK, including some in CSR’s home base of Cambridge, where CRS assets are expected to remain. Full integration plans and potential job cuts of CSR’s 2,130 employees in 11 countries will be finalized in the coming months. Subject to approval from regulators and CSR shareholders, Qualcomm is expecting the deal to close in the summer of 2015.
The Internet of Everything-Qualcomm to Acquire CSR (PDF)