ARM stock rises on Apple takeover talk
April 23, 2010 // Peter Clarke
London's financial district was full of rumors on Wednesday (April 21) that Apple is considering a takeover of processor intellectual property licensor ARM Holdings plc (Cambridge, England), according to the London Evening Standard newspaper. However, analysts at financial institutions were of mixed opinions as to whether the rumor was credible. One analyst said that a Apple taking minority stake in ARM was more likely than an outright takeover, but even that hardly made sense.
ARM's share price rose to 255 pence on Thursday morning. A spokesperson for ARM said the company was not commenting on the rumor.
Apple is said to be an architectural licensee of ARM's processor architecture and two years ago bought a well-regarded chip design team, P.A.Semi, so it could develop its own chips. The first fruit of that effort is thought to be the A4 chip inside Apple's iPad tablet computer.
The newspaper quoted an un-named London stock broker saying: "A deal would make a lot of sense for Apple. That way, they could stop ARM's technology from ending up in everyone else's computers and gadgets."
Apple might have to bid 400 pence a share to pull off a 100 percent acquisition which would value ARM at more than £5.2 billion (about $8 billion), the newspaper said.
"Quite incredible," said Janardan Menon, an analyst with Liberum Capital in London. "I don't see what Apple would get out of this. Apple has a strategy to design its own chips, but only for application processors, and it can do that with ARM intellectual property. It doesn't need to buy the company."
Menon continued: "The only reason for Apple to buy ARM is to deny the technology to other IP licensors. But Apple can buy an architectural license; change the architecture as much as they want to develop a differentiated product."
Google, Microsoft interestedIn recent days there have also been rumors about design teams working on novel processors, possibly ARM-based, for server applications in the interest of saving power in data centers. Two of the biggest players in information technology, Google and Microsoft, are said to be interested in ARM-based servers to host their search functions.
When asked about an Apple takeover of ARM, Didier Scemama, an analyst with RBS, said: "My first reaction was that this is ludicrous. But the share price reaction has me worried. It has continued to rise suggesting there might be something in this."
The ARM share price had climbed to 258.9 pence by the close of the London Stock Exchange on Thursday (April 22), up 3.35 percent on the day.
"A more likely scenario is that Apple might take a strategic stake, similar to the way it has done with Imagination, to help keep ARM independent," said Scemama. Imagination Group Technology plc (Kings Langley, England) is a publicly traded licensor of graphics processor cores, in which both Apple and Intel have taken minority holdings.
In October 2009 Scemama raised the possibility that ARM might be taken into ownership by its licensees, or a blocking holding taken, to prevent ARM falling into the hands of a private-equity consortium or a single company, such as Intel. However, in the absence of a takeover threat it is not clear why Apple would feel it necessary to move, Scemama said.
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