Will Buying ARM (ARMH) Be Otellini's Swan Song at Intel (INTC)?

November 28, 2012 12:00 PM EST
ARM Holdings plc (NASDAQ: ARMH) is seeing upside action Wednesday on rumors Intel (NASDAQ: INTC) might just throw in the towel on mobile and buy the UK-chip company who's technology is licensed by Apple and other leading smartphone makers.

The U.K. Mail Online reported that, "Dealers heard whispers that off-the-record talks have been held between the two companies."

While this publication is well known for spinning a yarn or two, they should be given the benefit of the doubt in this case since the company in question is headquartered in their own backyard.

Adding fuel to the fire is the recent news that long-time Intel CEO Paul Otellini will be stepping down in May of next year. As the U.K. Mail put it - "A move for ARM could prove to be Otellini's swan-song and word is he would be prepared to go hostile should the two boards not agree on a 'friendly' deal."

And a good buy it would be. Royalties for ARM are picking up while the industry is slowing down. In Q3, royalties rose 27 percent and the company is gaining share in its mobile segment in addition to TV and MCU. The company's Cortex A processor was the big driver of growth, although growth elsewhere has proven illusive. ARM's backlog was up 6% sequentially in Q3 and royalties rates per unit are on the rise (4.9c vs 4.8c).

Shares of ARM are up 1.5 percent Wednesday to $36.95, while Intel is flat at $19.90.

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