Oracle On The Prowl For Chip Maker

Oracle could expand on its hardware business following its protracted acquisition of Sun Microsystems, after Larry Ellison said his company may buy a chip maker.

Ellison’s comments immediately sent the shares of Ellison’s most likely target, UK chip designer ARM Holdings Plc, up 6.09 percent to 417.6 pence per share on the London Stock Exchange, as of 5pm Friday afternoon.

Cambridge, England-based ARM holds of a huge amount of microprocessor IP (intellectual property) and indeed, ARM is the company that makes the chips that power most of the world’s smartphones, including the Apple iPhone and other devices.

In July ARM signed a deal to give Microsoft access to its chip blueprints for phones and other devices.

Apple Rumours

In April this year, it was rumoured that Apple was considering buying ARM for approximately £5.2 billion, although the ARM chief executive Warren East later played this down. Further dampening down of the rumour came from iSuppli.

“Just because ARM’s IP plays an important role in mobile devices, that doesn’t necessarily mean ARM is of strategic value to Apple,” said iSuppli’s director and principal analyst William Kidd at that time

But now Oracle could be in the hunt.

According to Bloomberg, Reuters, and other sources, Ellison said at Oracle’s annual meeting in San Francisco this week that “you’re going to see us buying chip companies” to add to its resources in computer hardware.

Ellison Hints

“Our focus is to build our (intellectual property) portfolio. … You could see us buying chip companies,” Ellison reportedly said. “Silicon is very important, software IP is very important.”

“Although it’s by no means obvious that ARM is the company he has got in mind, we would argue that a takeover of ARM by Oracle would make sense,” Didier Scemama, an analyst with the Royal Bank of Scotland, wrote in a note to clients, according to Bloomberg.

“We primarily think this is about Ellison,” said Lee Simpson, an analyst at Jefferies Intl Ltd. in London, adding that the “Oracle speculation is unwarranted” and that the company would more likely target an enterprise-focused chipmaker such as Advanced Micro Devices Inc.