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CSR Drops Most Since July on Flagging Revenue Drop

CSR Plc, the U.K. maker of chips used in Nokia Oyj mobile phones, fell the most in three months in London after forecasting a drop in fourth-quarter revenue.

CSR declined 10 percent, the most since July 28. Fourth-quarter sales will be between $170 million and $185 million, the Cambridge, England-based company said in a Regulatory News Service statement today. Revenue for the same quarter a year earlier was $198.1 million.

The fourth quarter guidance reflects “current macroeconomic trends, low exposure to Smartphones and capacity constraints” in some GPS product lines, the company said in the statement. Third-quarter sales advanced 5.8 percent to $222.1 million. The average estimate of 12 analysts surveyed by Bloomberg was for revenue of $226.4 million.

CSR said it expects revenue to rise beyond this year as growth in its audio and consumer, and automotive business units outpace “subdued” growth in its handset business. The handset business accounted for 41 percent of revenue in the third quarter, the largest single contributor to earnings.

Third-quarter net income rose to $27.4 million from $8.6 million a year earlier.

CSR fell 35.7 pence to 309.6 pence at the 4:30 p.m. close, after earlier sliding to 281.9 pence, giving the company a market value of 564 million pounds ($890.2 million).

The fourth-quarter guidance is “very disappointing,” Sandeep Deshpande, an analyst at JPMorgan Chase & Co., said in a note, citing the company’s “lack of exposure” in the smartphone market. “The overall handset market is possibly growing close to 10 percent, but the smartphone market is growing by over 50 percent.”

JPMorgan lowered its target price for the stock to 370 pence from 420 pence, and cut its sales estimates for 2010 by 4.3 percent to $793 million and by 5.5 percent to $854 million in 2011.

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