ARM Holdings plc (ARMH): Should You Doubt This Company’s Prospects?

Page 1 of 3

British chip designer ARM Holdings plc (NASDAQ:ARMH) is a company that has inspired immense confidence within the tech industry for quite some time now, and the optimism has trickled down to the Street as well, as the company has delivered stellar results over the past few quarters. The main reason behind that has been the fact that ARM Holdings plc (NASDAQ:ARMH)-designed chips that are, in turn, manufactured by companies such as QUALCOMM, Inc. (NASDAQ:QCOM), NVIDIA Corporation (NASDAQ:NVDA), and Samsung, can be found in around 90% of the world’s smartphones and a considerable percentage of tablets as well.

ARM Holdings plc (LON:ARM)

However, a recent announcement by Samsung Electronics with regard to its Galaxy tablet range seems to have dented that confidence to some extent, with ARM shares taking a plunge. This is because Samsung has said that it would be using the Clover Trail+ processor manufactured by ARM Holdings plc (NASDAQ:ARMH)’s bigger rival, Intel Corporation (NASDAQ:INTC), in a particular version of its yet-to-be-released Galaxy Tab 3. In fact, some analysts have already started to express the viewpoint that ARM’s glory days are nearing their end.

But then, when I hear about this news, the first thing that comes to my mind is whether Intel is really aiming at going one up over ARM Holdings plc (NASDAQ:ARMH) at present, or whether it’s more of a question of ensuring the company’s own survival in a post-PC world. If you ask me, it’s more of the latter, and attaining supremacy over rivals such as ARM and its licensee QUALCOMM, Inc. (NASDAQ:QCOM) may not exactly be a priority for Intel Corporation (NASDAQ:INTC) right now. At least, that’s the way it should be for Intel, especially after its core PC business is fast moving into oblivion.

From that aspect, the Samsung design win definitely spells celebration time at Intel Corporation (NASDAQ:INTC). After all, Samsung is the second largest maker of tablets after Apple and controls around 18% of the worldwide tablet market, according to research firm IDC.

So, let’s delve a bit deeper and find out first why Samsung may have chosen an Intel chip, giving it preference over its traditional chip design partner ARM Holdings plc (NASDAQ:ARMH). And then, it might be prudent to conduct a short review of ARM’s present situation to assess whether this stock deserves to be a part of your tech portfolio.

Why Intel and not ARM

With regard to the first issue, there may have been several reasons why Samsung chose Intel Corporation (NASDAQ:INTC) over ARM, with pricing being a strong probability. Intel, as we know, is desperate to cut through into the market for mobile device processors and therefore, may well have offered a better deal to Samsung, who in turn, wanted a break from ARM Holdings plc (NASDAQ:ARMH)’s monopoly in this matter. After all, everyone would want to keep their suppliers on their toes.

The second reason might have been related to the recent supply breakdowns faced by Samsung, leading to unfortunate sales-related losses. That might have worked in Intel Corporation (NASDAQ:INTC)’s favor as the latter owns its chip manufacturing factories or ‘foundries,’ unlike ARM licensees such as QUALCOMM, Inc. (NASDAQ:QCOM) or NVIDIA Corporation (NASDAQ:NVDA) that outsource their chip manufacturing process to third-party suppliers.

But, if you look at all these factors combined, it’s more of a headache for ARM’s army comprising Qualcomm and NVIDIA Corporation (NASDAQ:NVDA), a problem that can and should be taken care of by clever logistics on their part. At the same time, this would ultimately boomerang on ARM Holdings plc (NASDAQ:ARMH)’s overall prospects, which is why it’s necessary to have a round-up of the advantages lined up in favor of ARM at present.

Page 1 of 3
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 30 percentage points in 13 months Learn how!

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!