Daily Telegraph comment on ARM results
ARM holds upper hand
COMPUTER chip designer ARM Holdings has long been a stock market darling and could easily look ready for profit-taking after a sixfold increase in its share price since this time last year.
Certainly, any company trading on a share multiple of 235 times forecast earnings needs a pretty convincing growth story to justify its stratospheric rating. Fortunately, ARM has a such a story to tell, and, in a world where some loss-making internet stocks are trading on the same multiple of turnover, the numbers alone should not put off new investors.
ARM occupies an exciting niche in the fast-growing market for microprocessors, where it licenses innovative chip designs and leaves others to worry about the manufacturing. The Cambridge-based company is almost all Britain has to show in this industry, but, together with Silicon Fen neighbour Symbian, it threatens to shift the centre of gravity for the next generation of internet access devices away from PC-focused rivals in California.
Both UK companies specialise in small hand-held devices such as mobile phones and pocket computers, which are tipped to overtake desktop personal computers in importance soon. However, unlike Symbian, whose operating system for these devices is largely responsible for the dramatic growth in the share price of its parent company Psion, ARM is already making money today. The chip designer is more diversified than its software neighbour and has shown a threefold increase in shipments since last year.
ARM's shares are closely tied to US investment cycles and will probably remain volatile. There is rarely a right time to buy technology shares, but every good portfolio should contain some, and ARM would be as good a place to start as any. Buy. |
