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CSR explains the logic of going video

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So CSR is supplying the CEO, the CFO and the chairman, the headquarters stay in Blighty and the shares stay on the London markets. But really, it's a merger, honestly...

CSR and Zoran are merging, with California-based Zoran getting a couple of seats on the board (one reserved for the company's founder) while CSR provides everything else – including the shares to buy off Zoran's shareholders and the merged company's name. But CSR is adamant that this is a merger, as the companies have little overlap in their products, and even use the same suppliers for some of them.

Both CSR and Zoran are fabless semiconductor companies, that is to say they design chips and then pay someone else to manufacturer them before selling those chips to a third party. In CSR's case, those chips cover wireless communications including Bluetooth and Wi-Fi, while Zoran's specialism is video processing; Zoran provides the chips for Cisco's Flip, among other things. But while CSR makes money too, Zoran has consistently lost money for the last few years.

Zoran had planned to make money during 2011. A letter sent to shareholders last month, while seeing off a takeover attempt by the hedge fund Ramius, claimed that "our DVD business segment to be profitable in every quarter of 2011" and "our DTV business segment to achieve breakeven profitability in the third quarter of 2011" resulting in "profitable and cash flow positive for the full year of 2011". Ramius wanted Zoran to get out of digital video in order to focus on image processing and the tuner business it acquired when it bought Microtune late last year. Zoran's management would already have been in negotiations with CSR when it pleaded with shareholders to "IGNORE RAMIUS' UNFOUNDED ATTEMPTS TO OUST YOUR INDEPENDENT BOARD MEMBERS" – in capital letters and everything.

We put Zoran's financial position to CSR, who admitted "we're going to have to fix some stuff", but pointed out that the combined company plans to save $50m in synergies too. Some of those savings will come from cutting heads – "we don't need two CTOs" – but the company reckons it will also be able to negotiate better deals with the chip fabricators as it commissions production runs of wireless and video chips, and perhaps some mutant combination of the two.

That's in the long-term plan, but the first thing is to bring wireless connectivity to digital cameras, and use CSR's contacts within phone manufacturers to upsell some Zoran video chips. CSR then has plans for TV remote controls using Bluetooth Low Energy, and making more of its location prowess (acquired though its acquisition of Nordnav in 2007, and merger with SiRF back in 2009), but isn't talking about those plans yet.

About half of CSR's 1,500 staff are based in the UK, around Cambridge, which will change to a quarter once the merger with Zoran's 1,500 staff is completed. But it will remain a British company providing wireless chips and video chips to global manufacturers – as local as any international mega-corporation can be these days. ®

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