Q&A with ABI Research about CSR Acquisition by Qualcomm

On October 15, 2014 mobile chipmaker Qualcomm agreed to acquire Cambridge, U.K.-based chipset vendor CSR for £1.56 billion (circa $2.5 billion). CSR is first well-known for its Bluetooth chipsets but also for its GPS expertise, since its acquisition of SiRF in 2009.

GPS Business News asked Patrick Connolly, a recognised expert in GNSS IC and analyst at ABI Research his thoughts on the acquisition and what it means for the geo-location market.

GPS Business News: First, what is the rationale of the acquisition?

Patrick Connolly: Well, it would certainly seem that GPS was only a small part of the decision, with the focus primarily on CSR’s Bluetooth credentials, and in particular the ability to penetrate into markets like IoE, automotive, home entertainment, etc.

ABI Research estimated CSR’s market share from total Bluetooth chips targeting non-mobile and computing devices to be about 20% in 1H 2014. As far as IoE is concerned, Qualcomm has made the strategic choice to invest in Bluetooth rather than ZigBee because the technology could help the company build on its existing mobile assets and create a more cohesive connected world, using Bluetooth as a core technology to connect everything to the Internet.

The continuous efforts of CSR to innovate over Bluetooth beyond SIG standards are key assets Qualcomm could use to drive its strategy for IoE. For example, CSR has recently upgraded its Bluetooth radio interface with mesh network capability, and it also made its Bluetooth technology friendlier to IPv6, while the existing Bluetooth SIG standards continue to use protocol translation techniques to get things/applications connected to the Internet.

GPS BN: What was the GNSS/location business of CSR at the time of the acquisition?

PC: From a GNSS perspective CSR is/was midway through a tough but necessary transition away from high volume cellular markets, refocusing on more traditional automotive, fleet management and module business. To enable this, it was migrating its SiRFstarV platform towards true Galileo support, concurrent GNSS capabilities and moving from ROM to Flash based memory.

On indoor, it has its cloud-based SiRFusion Positioning Centre, which would have enabled it offer LaaS to OEMs, irrespective of the underlying GPS and/or connectivity ICs.

GPS BN: What does it mean for Qualcomm in terms of location technology, and for the whole GNSS IC business?

PC: From a GNSS IC development point of view, Qualcomm is acquiring expertise and a very strong brand, but Qualcomm’s dominant position in GNSS IC shipments is no secret, so in terms of market share, CSR offers very little apart perhaps from traditionally strong positions in emerging automotive/vehicle spaces. Having acquired Atheros primarily for its Wi-Fi capabilities, Qualcomm sunsetted its GNSS offering. The SiRF brand and technology is a very different thing, but should it take a similar path it will really open up smaller markets to the likes of u-blox, ST Micro and Mediatek, who have in recent years been significantly chipping away at CSR’s market share.


Nokia’s HERE Value is Down to €2 Billion

When announcing its financial earnings today Nokia revealed it now estimates the value of its mapping and LBS subsidiary HERE to €2 Billion.

See below the entire explanation from Nokia’s financial press release:

“Nokia’s continuing operations reported an operating loss in the third quarter 2014 as a result of the EUR 1.2 billion goodwill impairment charge related to HERE.

In the third quarter 2014, we conducted an impairment assessment of the goodwill related to our HERE business as a result of an adjustment to the HERE strategy and the related new long-range plan. We concluded that these factors resulted in a triggering event requiring an interim impairment test to assess if events or changes in circumstances indicated that the carrying amount of our goodwill may not be recoverable. As a result of the impairment test, we recorded a charge to operating profit of EUR 1 209 million for the impairment of goodwill. The impairment charge is based on our estimate that the recoverable amount of HERE is now EUR 2.0 billion. After the impairment charge, the carrying amount of goodwill for HERE is EUR 2.3 billion. The impairment negatively impacted our reported diluted EPS by EUR 0.30.

The impairment charge is the result of an evaluation of the projected financial performance of our HERE business. This takes into consideration the clearly slower ramp-up of net sales related to direct to consumer monetization than earlier expected and our plans to curtail our investment in certain higher-risk and longer-term growth opportunities. It also reflects the current assessment of risks related to the growth opportunities that we plan to continue pursuing, as well as related terminal value growth assumptions. After consideration of all relevant factors, we reduced the net sales projections for HERE, particularly in the latter years of the valuation which, in turn, reduced projected profitability and cash flows. Additionally, changes in foreign exchange rates increased the carrying amount of goodwill in euros which in turn increased the amount of the impairment.

We believe HERE will continue to be a leading location services business. We plan to continue to build on our strength in the automotive segment, to expand our enterprise business, and extend our reach to consumers through deals with mobile device vendors such as Samsung and internet players such as Yahoo. Thus, we continue to believe we have an opportunity to create significant value with the HERE business, as connected cars become more pervasive and as enterprises deploy new location-services to improve their productivity and efficiency.“

Our analysis

Out of this announcement it worths to point out several elements:

First, it is interesting to get reminded that Nokia paid $8.1 billion (€5.7 billion) in cash for the acquisition of the digital map maker Navteq (€5.4 billion net of Navteq existing cash balance) in 2007.

In addition to that HERE was built not only out of Navteq but also as a merger with Nokia Maps (the navigation software and LBS platform built by Nokia and headquartered in Berlin). So the lost value between €5.7 billion and €2 billion is even bigger than what it looks if we add the Nokia software asset.

We can understand that not only the map asset was over paid by Nokia (which we already knew based on previous write-off) but also that it has been – until recently – overvalued based on B2C revenue expectations that did not come to fruition.


Sygic Acquires OSM-Based Navigation App Be-On-Road; Reach 55M Users

Slovakia-based navigation software developer Sygic has announced last week the acquisition of Be-On-Road, a turn-by-turn GPS navigation application for iOS and Android that uses free map data from Openstreetmap.

Be-On-Road was developed by Czech Republic-based Aponia Software, but this company will stay independent, the acquisition concerns only the navigation app.

In a phone interview with GPS Business News, Sygic CEO Michal Stencl explained the rationale behind this product acquisition: “This is a great acquisition that offers us a stake into the low end smartphone navigation market that uses Openstreetmap or other crowdsourced databases. This is also a protection against future competition, indeed Be-On-Road has been growing very rapidly, especially on Android. The app currently enjoys an average of 60,000 downloads per day.“

Last year Sygic posted revenue of $18 million. This year Stencl expects the revenue to grow 30 percent. From 55 million navigation app downloads to date he expects to reach 100 million users mid 2015.

Stencl currently estimates his company is the number two mobile navigation player worldwide in terms of downloads after Google/Waze. But unlike Google, he does not believe in making a good business with advertising; he prefers to monetize downloads with a freemium approach using in-app purchases.

The monetization of the free Be-On-Road app today is based on upgrades to better maps (i.e. TomTom or HERE), but in the future Stencl will prefer to stick to OSM for this app and offer new features as in-app purchases.

Automotive App Business

Besides the low end navigation market and his current business of premium paid apps, Sygic is also pursuing business with automotive companies with a dedicated team. Recently the app has been selected by Jaguar Land Rover to be part of InControl, the app platform of the luxury car maker.

Stencl forecasts to close deals with 2 or 3 more automotive players in the coming months. “We believe smartphone will play a primary role in vehicle navigation,“ he said to GPS Business News.

Stencl has for a long time been thinking that smartphone will defeat on-board navigation systems. Unlike his Hungarian competitor at NNG, he did not try to offer its software to car makers for on-board systems. Future will tell us if he is right.


AutoNavi Acquired by Alibaba for $1.5 Billion

Chinese LBS and digital map provider AutoNavi has agreed to be acquired by giant chinese e-commerce group Alibaba in a deal valuing the purchase at $1.5 billion.

Alibaba was the largest shareholder in the company (28%) since May 2013.

The deal is expected to close during the third quarter of 2014.

The shareholders of the Company will receive US$5.25 in cash per ordinary share or US$21.00 in cash per American depositary share. The price represents a premium of 27 percent over the stock price the last trading day before the Alibaba proposal.

Revenue and profit decline but fast growth of mobile users

The acquisition of AutoNavi comes at a time where the company was facing a change in business model on the mobile market.

AutoNavi 2013 revenue were $141.7 million, down from $159.7 million in fiscal year 2012. Net loss was $25.4 million in fiscal year 2013, compared to net income attributable to AutoNavi of $36.5 million in fiscal year 2012. While its cost of map collection and processing has increased, its automotive, web, mobile and enterprise businesses have declined. The company has notably lost BMW as a map data customer in its latest car models.

The interest for Alibaba is the fast growth of AutoNavi’s mobile map and mobile navigation apps. Users of AutoNavi’s mobile map application grew to over 200 million as of the end of the fourth quarter of 2013, up from 98 million as of the end of 2012. The monthly active users of this app are 92 million.

In addition AutoNavi’s mobile navigation application was downloaded and pre-loaded on a total of approximately 98 million smartphones in the fourth quarter of 2013, compared to 83 million in the third quarter of 2013.

Looking at these numbers it is clear that Alibaba is not paying $1.5 billion for a money losing digital map provider but for a fast growing mobile apps company.

Insurance Telematics Supplier Octo Sold for €405m

Amadeus Capital Partners, today announced the sale of Octo Telematics for €405 million to Renova Group, a private, multi sector Russian group.

Octo was an early pioneer in the telematics sector in Italy and offers solutions for insurance and transport companies. When Amadeus invested in 2010, alongside Montezemolo & Partners, the company’s turnover was some €50m. Turnover for 2013 is expected to exceed €120m, with eight out of the world’s largest car insurers as Octo clients.

The company is profitable and has expanded its business since 2010 into the United Kingdom, the USA, Germany, Canada, South Africa and other markets.

Renova Group is a major private Russian business group which owns and manages assets in metallurgy, mining, chemical, construction, transport, energy, telecommunications, high-tech engineering, public utilities, medical and financial sectors in Russia and abroad.

Viktor Vekselberg, Chairman of the Board of Directors of Renova Group, said: "We believe in Octo Telematics and in its huge market potential, including in Russia. This purchase perfectly matches the strategy of Renova Group, which involves a gradual transition to investments in high-tech and innovative sectors and exit from the resources sector".

Learn more: read the analysis of Ptolemus consulting, a firm expert in insurance telematics.

HERE (NAVTEQ) Sales of Auto Map Licenses Up 33% in 4Q 2013

Nokia announced today their financial results for the fourth quarter and the full year 2013, offering some visibility into its HERE division, formerly known as NAVTEQ.

Automotive map licenses sales have gone up 33% the fourth quarter 2013, with sales of new vehicle licenses of 3.2 million units, compared to 2.4 million units in the fourth quarter 2012 and 2.6 million units in the third quarter 2013.

On a year-on-year basis, unit sales to vehicle customers increased primarily due to higher vehicle sales and higher consumer uptake of in-vehicle navigation.

Sales to vehicle customers represented well over 50% of external HERE net sales in the fourth quarter 2013, as well as in the fourth quarter 2012 and the third quarter 2013.

Unfortunately for HERE, that automotive success was “partially offset by lower sales to personal navigation device (PND) customers,“ so external sales went up but only 10 percent, from €204 million in the fourth quarter of 2012 to €225 in the fourth quarter of 2013.

However HERE total sales have decreased from €278 million to €254 million (10 percent down). The reason for that is the fast decline of internal sales (i.e. navigation and maps found in Nokia devices): €74 million end of 2012 to €29 million end of 2013.

The good news for the longer term is that internal sales can not go much further down while automotive license sales are likely to continue to grow at a good pace.

Qualcomm Sells Omnitracs Europe to Astrata

Astrata Group, a fleet management business headquartered in Singapore, has announced the acquisition of Omnitracs Europe – formerly known as Qualcomm Enterprise Services Europe – from Qualcomm. Financials of the transaction, were not disclosed.

According to Johan Fagerberg, analyst with Berg Insight, Omnitracs “has an estimated 30,000-40,000 active units in Europe.“

"We are excited to significantly expand Astrata’s presence in Europe with the acquisition of Omnitracs Europe. With highly complementary geographic presences, the combined operations will truly have a global reach and in-house access to best-in-class technologies, enhancing our product and service offerings to our customers throughout the world," explained George M. Kappaz, Chairman and CEO of Astrata, and Chairman of CIH International Group, the private equity group that owns Astrata.

This acquisition follows with only a few months the transaction between Qualcomm and Vista Equity Partners for the American part of the Omnitracs business (read here).

Telit Acquires NXP’s Automotive Telematics Onboard unit Platform for $9m

Wireless and location module vendor Telit has announced today an agreement to acquire Automotive Telematics Onboard unit Platform (ATOP) business from NXP.

The transaction price is $9 million to be settled by approximately $2 million in cash and up to 3,300,000 Telit shares. The transaction is expected to be closed during the first quarter of 2014.

"The ATOP acquisition provides Telit with additional expertise in automotive platforms which are becoming increasingly dependent on advanced software engineering, as well as a significant customer base which has already designed systems with ATOP,“ said Oozi Cats, Chief Executive of Telit.

“The multi-service capable ATOP platform provides support for a range of features from its single package, including vehicle location & tracking, remote starting and diagnostics as well as business applications such as fleet management. The acquisition also delivers our teams a high level of competence in system security, necessary for protecting not only vehicle but also the increasingly important elements of driver privacy under such applications," he added.

Indoor Location Startup Sensewhere Granted U.S. Patent

Edinburgh-based indoor geolocation start-up Sensewhere was granted a patent by the US Patent and Trade Office for a method that estimates the location of a plurality of electromagnetic signal sources.

The patented technology enables consumer devices to automatically and accurately georeference electromagnetic signal sources deep indoors. These signal sources can be generated from Wi-Fi, Bluetooth, NFC or cell-towers and form the basis for sensewhere’s dynamic proprietary database.

This database, in turn, continuously updates and improves iteratively, ultimately offering users accurate and reliable location information worldwide.

“Our Locating Electromagnetic Signal Sources patent enables a global indoor positioning database that can be updated dynamically and will adapt quickly to changing environments,“ said Sensewhere’s CEO, Rob Palfreyman.

Sensewhere’s technology also uses whatever sensors available on a mobile device, such as accelerometers, Gyro’s, and Barometers, as well as of course GPS when available – in order to provide more accurate positioning. The technology adapts itself to different users walking styles and recognises when a user is stationary, walking or moving up the stairs.

Ruckus Wireless Acquires Indoor Loc Provider YFind Technologies

Wi-Fi solutions vendor Ruckus Wireless today announced the acquisition of Singapore-based YFind Technologies, a supplier of indoor geolocation technologies and analytics founded in 2010.

The price of the acquisition was not disclosed by Ruckus Wireless. YFind had raised a SG$1.5 million (US$1.2 million) Series A round in June 2012, following a SG$750,000 ($610,000) government grant.

YFind uses the WiFi network of venues to position mobile devices indoor. According to them: “YFind Positioning System (YPS) is a solution that is low‐cost, easy to deploy across venues of all sizes and works on all mobile platforms including iOS, Android, Windows Phone, and Blackberry.“

The start-up company recently launched “The RetailHQ“, a dashboard that uses indoor location to offer footfall analytics for retail spaces. (read more).

When launching publicly the service YFind indicated it was already live with Singaporean test retailers such as Tangs, Perennial Malls and Dairy Farm Group.

The acquisition of YFind by Ruckus Wireless is another step in the consolidation of the indoor location technology market.

ThinkSmart Technologies (indoor analytics) was bought by Cisco in March 2012. One year later indoor location supplier WiFISLAM was acquired by Apple, then in May 2013 Enterprise WiFi network vendor Aruba acquired Meridian, a U.S. start-up that offers an app making platform for indoor geo-location.

Looking at Cisco’s, Aruba’s and Ruckus Wireless’ acquisitions it is clear that Wi-Fi enterprise vendors want to dominate the indoor geo-location space to offer additional services to their venue customers: location, analytics and more.

However it does not mean Wi-Fi will continue to be the mainstream technology for indoor location forever. Battery powered Bluetooth 4.0 beacons offer a cheaper alternative. One vendor of these systems recently shared with us that the cost of adding a single additional access point from companies such as Cisco or Aruba is similar to his own price for a complete indoor location system for the whole venue with Bluetooth beacons.

See below a demonstration of YFind technology in a shooping mall in Singapore