Arik Hesseldahl

Recent Posts by Arik Hesseldahl

Who’s Got the Beefy ARMs Now? A Chip Designer’s Shares Are Pumped.

Five years ago, if you tried to explain the business model of the British chip designer ARM Holdings, it would have made the head of any layman spin. Semiconductor intellectual property? Embedded microprocessors? Cores? Nerd words, all of them.

Yet ARM — which designs the brains used in chips that power devices as varied as Apple’s iPhone and iPad; numerous tablets running Google’s Android; and scores of other phones, consumer gadgets and assorted stuff besides — is, as stocks go, looking pretty beefy of late. Having more or less conquered the world as the chip platform of choice in smartphones — and having so far resisted the attempts by chip giant Intel to encroach on its territory — its shares are, for the moment, on top of the world.

As Bloomberg News notes today, ARM Holdings is the best-performing stock on London’s FTSE exchange over the past six months, 12 months, two years and three years. ARM’s shares in the U.S. aren’t faring too shabbily, either. Having bottomed out at $3.48 a share in early 2009, the shares are up 748 percent, and closed Thursday at $28.43.

Earlier this year, ARM looked poised to challenge Intel on its traditional turf, and emerged as a new alternative to Intel on Microsoft’s Windows, as the basis for new notebook chips from Nvidia, Texas Instruments and Qualcomm. Much of the growth in the share price has come since a series of announcements at the Consumer Electronics Show, the biggest being that Microsoft was going to adapt Windows to run on ARM-based chips.

That kind of share performance has analysts wondering which way the shares will go next. Morgan Stanley’s Francois Meunier downgraded the London FTSE shares on Wednesday based purely on the valuation, saying it might be time to “take a breather.”

Were this any other stock, that might be fair advice. But there are others arguing that ARM may have more room to run. Raymond James analyst Hans Mosesmann initiated coverage earlier this week. He thinks Intel and ARM are unlikely to take much share from each other in their respective territories, and that any major shifts in favor of one or the other could take years to develop. He rated the stock — in this case the American Depository Receipts that trade on the Nasdaq — “outperform” with a price target of $35.

So which one is right? Bloomberg says that 10 analysts rate ARM a “buy,” while nine more say “hold.” Fourteen say “sell,” concluding that ARM shares have peaked for now, not because their opinion on the company’s future has turned south.

When I talked to ARM president Tudor Brown earlier this year, he made an interesting point that bears repeating: After 20 or 30 years of the PC being the center of computing, the entire space is, as he put it, “breaking down and fragmenting.” It’s the kind of opportunity that plays right into ARM’s hands — or rather, its arms.

(Image via Wikipedia.)

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I think the NSA has a job to do and we need the NSA. But as (physicist) Robert Oppenheimer said, “When you see something that is technically sweet, you go ahead and do it and argue about what to do about it only after you’ve had your technical success. That is the way it was with the atomic bomb.”

— Phil Zimmerman, PGP inventor and Silent Circle co-founder, in an interview with Om Malik