27 February, 2015 - 09:51 By Tony Quested

CSR’s head hits iron ceiling

Cambridge is losing two of its best CEOs in the fallout from two acquisitions that on the surface appeared to add up to more than the billions of dollars their combined value represented.

Stan Boland has already left Neul, which went for $25 million to Chinese ICT heavyweight Huawei. The writing is on the wall at CSR where Joep van Beurden will leave when Qualcomm completes its takeover of CSR, which will either be in June or December – the latter being the drop dead date for the deal to complete.

At $2.5 billion, the acquisition by Qualcomm values CSR at £9 a share. Because of the acquisition process, that price is today frozen at around £8.80p while the FTSE has now broken the dotcom bubble record to hit an all-time high. CSR’s technology embraces many things from wearables to IoT: no-one signed up to cryogenics!

The first thing to be said is that outstanding chief execs in Cambridge are not so thick on the ground that the cluster can afford to lose people of the calibre of Stan Boland and Joep van Beurden, who has morphed CSR into a company tailor-made for a FutureTech world.

Going back to 1990, without Boland the whole Acorn-ARM split may have become an acrimonious divorce with no winners rather than an amicable separation in which the partner left behind (Acorn) at least preserved its self-respect while the one set free – ARM – progressed to enjoy a wonderful new life. 

And it was Boland who helped James Collier, a co-founder of CSR and founder of Neul, release the real value in Neul, pioneer of the Weightless protocol and a standard bearer for device connectivity under the Internet of Things. Boland and van Beurden will both return at the top but it is not certain that their renaissance will be in Cambridge.

It is one of the anomalies of big business that in a takeover, the acquirer wants its own head honcho, illogical as it is that the person best placed to take the acquired business to even greater glories is the one that has taken it thus far. As a consequence, once they have tipped out the bathwater, the baby goes with it.

HP found that to their cost when they put Mike Lynch in a position where he had to report up the line after their acquisition of Autonomy – a disastrous first move if ever there was one.

The fact is, the HPs, Qualcomms and Huaweis of this corporate world are acquiring these businesses either to add some zip to tired portfolios or to bolt on new capabilities in synergistic high-growth areas – but crucially areas in which they have little expertise or track record. No wonder so many acquired businesses start going backwards after being taken over.
HP is desperately trying to revive Autonomy and Aurasma in Cambridge with new generation technologies. On the face of it, Huawei’s track record in ICT ought to be enough to pluck real value from Neul – and build on it in the burgeoning IoT segment.

The jury remains out on whether Qualcomm has what it takes to squeeze every bit of juice out of CSR. There will be a lot of pain and, I suspect, redundancies, in the coming weeks and months as Qualcomm reviews headcount and business sectors in a streamlining process – both within CSR and the parent body. How much of ‘legacy Qualcomm’ is the new American parent prepared to give up? How much does it appreciate the capability of CSR and have the knowhow to realise the maximum value?

One wonders what CSR’s share price would be today had it not be snarled in regulatory red tape. That struck me on Wednesday when Britain's benchmark stock index closed at all-time high as relief over a Greek debt deal helped it finally breach levels struck during the dot.com boom back in 1999. The FTSE 100 advanced 0.5 percent to 6,949.63, closing above its previous high around 6,930 – achieved some three months prior to the birth of CSR.  

Given all the positive product news coming out of CSR and the health of several stocks of leading technology businesses, one wonders what the shareholders must feel right now about the benefits or otherwise of the Qualcomm acquisition.

The board’s intention is to finalise the takeover by mid-year with a final date of December, by which time who knows the size of the opportunity (and share price) that would have been lost for shareholders.

Other issues occurred. Did the original founders of CSR sell out too soon? And how far could they have taken the company under their own steam?
I asked CSR co-founder and first CEO Phil O’Donovan and he was typically forthright in his responses. He said: “The current situation is very frustrating because not only is the company not reporting results or posting dividends but, despite the engineers, salesmen and marketers beavering away, there is this dead-weight of what the future may or may-not hold for staff.  

“An iron ceiling has been set following acceptance by the CSR board of Qualcomm’s offer of £9 per share. This is not a done deal but a wait and see deal.”

So did CSR’s founders exit the business too soon? “Speaking for myself, of course there are regrets. Would the share price be twice what it is now if the founders were still at CSR – who knows? 

“In my opinion we left the company too early and we have only ourselves to blame for that. One of the positive characteristics of founders is that they are optimists and mostly see what good can and might happen. If they were not inclined this way then they would see all the reasons why they should not start companies in the first place.”

As a Cambridge-based business angel, O’Donovan’s driving objective now is not only to help founders start and grow their businesses but also – working with them and central and local government where possible – help them thrive and grow as independent British companies for many years following their gestation and birth.”

ARM has stayed independent and thrived. So has Domino, despite the American giants Dover and Danaher hoovering up every other half-decent inkjet printing business in Cambridge in the last 30 years.

Staying independent is easier for industrial sector businesses who are chiefly regarded as standing at the coal face rather than the cutting edge. Life science and hi-tech businesses are usually the ones that attract the buyers because they are perceived as having the sexy devices or IP that can prove really disruptive in the most lucrative vertical markets.

Another issue – and it may be down to the anal attitude that appears to be prevalent in most men and women in suits – is that when tech companies float or are taken over the founding executives with the most knowledge and passion are generally moved aside because they are not considered city friendly.

Cambridge and the UK will be in severe trouble if box-tickers are allowed to predominate in technology cluster companies. Risk-taking comes with the territory for entrepreneurs and while their worst excesses should always be reined in, the suits ditch brainpower, instinct and pizzaz at their peril.

Cambridge told to fight for home rule

Cambridge business leaders have been told they will have to fight hard to become the first UK city to run its own affairs under a Coalition devolution initiative.

Danny Alexander, Chief Secretary to the Treasury, told executives at the start of Cambridge Business Awards Week, that the Government intended to run a pilot scheme for devolved government and that Cambridge was on a “not very long” shortlist.

Local councils previously joined forces to clinch an historic City Deal for Cambridge and Alexander said more of the same would be needed if Cambridge was to become the home rule test bed. He said local influencers would have to join forces, lobby hard and make a good case to run its own affairs.

Alexander also announced that the Government was about to launch the biggest overhaul of business rates in UK history.

A show of hands prompted by Cambridge LibDem MP Julian Huppert showed pretty much 100 per cent backing for self governance but again Alexander stressed it was a competition not a gift.

Claire Ruskin, chief executive of Cambridge Network, said that in this and other issues Cambridge organisations had to work even more closely together to attract more Apples and AstraZenecas to the city. Divisive strategies or agendas driven by self interest would not serve Cambridge well as it looked to build on achievements to date in growing the size and power of the cluster.

Cambridge MPs representing the Conservatives, Labour, LibDems and Green Party took part in a hustings to launch Awards Week – an audience poll handing Huppert a clear majority.

Awards Week is a good example of the kind of collaboration Ruskin wants to see more of, organised by all the local networks on behalf of Business Weekly and the Cambridge News. Alexander congratulated Cambridge on the initiative. Sponsors and shortlisted companies involved in both Awards events attended in huge numbers, which also impressed the Chief Secretary.

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