Is Apple Planning £5.2bn Bid For ARM?

Shares in ARM Holdings skyrocketed this week after speculation on the London financial markets that Apple is about to make a bid for the British chip company, which provides the processors for most of the world’s leading smartphones.

City Speculation

The story emerged in the Evening Standard, not usually known as a bastion of tech related articles, which reported “gossip2 in the City that Apple was considering making a move on the chip maker.

The speculation caused shares in ARM to rise 8.1p ($0.12) to 251.1p ($3.86), with more than five million shares changing hands by midday Wednesday. Shares were trading at 257.7p ($3.96) as of 4pm on Thursday afternoon.

“A deal would make a lot of sense for Apple,” said one trader told the newspaper. “That way, they could stop ARM’s technology from ending up in everyone else’s computers and gadgets.” These traders believe a bid would come in at around 400p ($6.15) a share, valuing ARM at more than £5.2 billion (£8 billion).

ARM, The Quiet Chip Giant

ARM is based in Cambridge and is the quiet man of the chip world. Its microchips can be found in most of the world’s mobile phones, including Apple’s iPhone. Indeed, back in January when Apple revealed that it had created its own CPU to power the iPad, there was speculation that the British chip-maker ARM was the brains behind the hi-tech A4 chip.

ARM has made aggressive product developments, and despite Intel pushing its low-power Atom processor hard, nas found a place within the new category of smartbook devices, including machines from HP.

Apple has always made its intention clear that it wants to make its own chips, especially after it acquired PA Semi in April 2008, which specialised in sophisticated but low power chips. Incidentally, PA Semi licensed much of its intellectual property from ARM.

So Is Apple Going To Do It?

Apple is certainly not short of money and could easily pay a multi billion pound asking price. Apple said recently that it has nearly $42 billion (£27 billion) of cash reserves, but in reality it is not in Apple’s genetic makeup to make huge strategic acquisitions, although some feel that Apple’s enormous cash reserves could well see Steve Jobs embarking on something of a shopping spree.

In the end, Apple usually builds its own technology inhouse, and what it can’t or won’t build, it sources from elsewhere. Apple is a big customer of ARM chips, and therefore already has a close relationship with the company, without having to actually acquire it. Time will tell though.