Demand for shares in soon to be floated ARM Holdings Plc, the Cambridge RISC microprocessor designer, has been so intense that broker Morgan Stanley has been forced to up its price range by 50% to a mid-price of 247m pounds. Unconditional trading in the shares is scheduled to start on April 16, and as is usual with institutional placings of this type, the general public doesn’t get a look-in until this date; by which time they will have missed the eagerly anticipated jump in value. ARM, or Advanced RISC Machines to give the company its full title, has developed a range of fast, low power microprocessors for use in the exploding mobile data and communications market, including phones and palm top computers. Its success in selling its core designs to many of the big multinational electronics companies (ARM itself is fab- less) has lead to a frenzy of anticipation for this issue. And the timing could hardly have been better. The big UK investors have taken a shine to the new Information Technology sub-sector of the London market, falling over themselves to buy into stocks hitherto considered too risky.
By Alex Sloley
But small investors who miss the initial fast buck would be advised to cast a weather eye to the horizon, where the looming mass of Motorola Corp, one of the true giants of this sector, has just hove into view. Motorola has just arrived on the scene with M-Core, a chip designed expressly for the demanding mobile market. Kyle Harper, manager of wireless markets and programs for the M-Core products sector argues that this gives Motorola a huge advantage over ARM’s ten year old technology. Mobile data- processing is stretching current technology to the limit. Applications are becoming more and more demanding, while power consumption is constrained by real world battery lives. To combat this, RISC microprocessors must be highly code efficient. ARM was considered code efficient when it arrived, and efficiency has been improved by its ‘Thumb’ compression technology, but many feel that M-Core’s innate efficiency will soon raise it to a level above. We would never underestimate Motorola, said ARM’s chief operating officer Jamie Urquhurt, they’ve done some good marketing (of M-Core) but it doesn’t stack up. Urquhurt claims that Motorola has been selective with its benchmarking data by not comparing like with like. He counter-claims that the latest ARM chips are faster and less power hungry than M-core when measured by more commonly accepted benchmarks. Urquhurt also puts great store by his company’s industry-wide momentum. With 28 licensees of the technology and a fast growing user base, ARM is a well-established name. While Motorola does have phenomenal resources, this kind of momentum just can’t be bought, he argues. And then of course there’s ARM’s link with the biggest of them all, Intel Corp; a link guaranteed to excite investors. Intel has agreed – subject to the Federal Trade Commission’s approval of its purchase of assets from Digital Equipment Corp – to produce, sell and enhance DEC’s StrongARM variant of ARM’s technology. But Intel, for all its massive resources, has yet to succeed in the embedded processor market. StrongARM looks to be a key part of its strategy, and by association, the technology cross license between Intel and ARM will constitute a sizeable chunk of future earnings estimates for the Cambridge-based company. But word has it that most of the brains behind DEC’s StrongARM operation walked out the door when Intel took over. ARM admits to witnessing a loss of staff in the Austin labs, but argues that this isn’t insurmountable. All this is unlikely to dull ARM’s luster in the short term, but in three to five years, Motorola could have built up some serious momentum in this arena. Not good news for the folks from Cambridge.
