LONDON Processor intellectual property licensor ARM Holdings plc (Cambridge, England) is set to outperform Intel in the netbook and smartbook markets over the next two and three years, but that prospect of success could trigger a takeover bid for the company, according to Didier Scemama, semiconductor analyst with ABN AMRO Bank NV.
Scemama has predicted that ARM might be taken into ownership by its semiconductor and equipment licensees, or at least a blocking holding be taken, to prevent ARM falling into the hands of a single private-equity or industry company. Alternatively, ARM could be placed under the control of a non-profit foundation, in a similar manner to the way in which Symbian and its mobile phone operating system was controlled prior to its acquisition by Nokia.
The driving force behind such a change in ARM ownership is a shift towards computing based on ARM-Linux and away from Intel-Microsoft over the next technology cycle, according to Scemama. "First, we believe ARM processors will match Intel's performance while beating them on power consumption and possibly cost. Second, we expect PC manufacturers to switch from Intel/Microsoft OS-based platforms to ARM/Chrome OS-based platforms beginning in 2H10 to reduce their dependence on Intel and improve margins," said Scemama in a note to clients.
As that momentum gathers pace Scemama believes Micrsoft will be forced to declare its support for high-level Windows operating systems running on ARM processors. "Third, with ARM-based PCs gaining traction with consumers, we believe ARM could receive support from Microsoft and port Windows to the ARM architecture. We estimate ARM could capture 30 percent of the notebook PC processor market by 2014, creating a major disruption to the Intel-Microsoft domination of the PC market," Scemama said.
The analyst is not the first to predict success for ARM in the netbook/smartbook market. But he has taken the analysis deeper and reckons that the free availability of ARM stock could make the company vulnerable to a takeover bid.
Long before ARM enjoys the financial benefits of increased significance in the netbook, notebook and personal computer markets, its stock price could start to rise making it an acquisition target. But at the same time the strategic nature of ARM's position in the ecosystem it has created could make its independence important to such companies as Qualcomm, Broadcom, Apple, Nokia, Google and TSMC, said Scemama.
"A takeover is quite likely. But not by Intel," Scemama told EE Times. "I think it will be a consortium of the chip companies and electronics OEMs that have a strategic interest in ARM," he added.
One reason for ARM's vulnerability is that its stock is 100 percent available through its listings on the London Stock Exchange and Nasdaq, Scemama said. "Companies like Apple, Nokia, Google, IBM, TSMC; they are needing ARM to be independent. They could make a pre-emptive move."