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Technology Stocks : ARM Holdings (Advanced RISC Machines) plc. -- Ignore unavailable to you. Want to Upgrade?

To: Mats Ericsson who wrote (571)	10/14/2000 9:22:26 AM
From: Mats Ericsson	Read Replies (1) \| Respond to of 912

MIPS seen growing faster than.... ( My take on following investment letter: who knows etc. but, I've been folloving Mips and Arm and been looking sell-buy interest on daily basis. Mips has been growing faster in terms of shortinterest this season 2nd half2000. Go and have a look. Mips stock has been shorted every day in last 2 weeks, no buy-interest seen. If something revolutionary happens it can make a huge jump, too. But every information I get seems to be confirming that Arm is executing faster and 1st over MIPS. This news smells like somebody mm has got an overload of MIPS stock. viwes.com Short interest Ratio on month 09/00 MIPS-15.37 ARMHY-1.56 RFMD -2.90 qcom -0.78 worldlyinvestor.com Friday October 13, 11:20 am Eastern Time Sector of the Day: MIPS Chips Are Current Designs Robert Cyran, Correspondent The microprocessor designer will grow more in the long-term than rival ARM Holdings. Companies like MIPS Technologies (Nasdaq:MIPS - news) or British-based ARM Holdings (Nasdaq:ARMHY - news) are capitalizing on a paradigm shift in chips. It's easy for investors to become confused by semiconductors. After all, computers are no longer drivers of the chip market. That honor now goes to things like Internet routers, set-top boxes for satellite TV, cell phones, video-game consoles and robotic pets, like the Aibo. This shift has come about from the growth of what's called ``systems on a chip,'' where one chip takes the place of several. The new chips can do more things and are extremely cheap. The problem is -- and it's a chronic one -- chip designers can't keep up with advances in chip technology. That's where MIPS and ARM come in. Rather than design a semiconductor from scratch, chip makers can license a microprocessor design (called a core) from MIPS and ARM and focus on differentiating the chips. Both companies are profitable and earnings are expected to rise sharply as more high-margin royalties start rolling in. Chip makers typically pay several hundred thousand dollars in a license fee and then a low single-digit royalty per chip. What's even better for investors is that these companies never have to worry about being stuck with rapidly depreciating inventory. After all, they don't make anything. ARM and MIPS will do well, given market researcher's expectations of 60% to 70% annualized growth for cores over the next several years. ARM may grow faster, but MIPS looks like a better buy, based on valuation. Core Operations Historically, MIPS concentrated on designing high-performance cores and ARM concentrated on cores for low-power applications. MIPS did well designing cores for video games and set-top boxes; ARM won the lottery during the cell-phone boom. ARM earned close to $13 million on sales of $38 million in last quarter, more than double what it earned a year ago. MIPS earned $5.5 million on sales of $21 million. Analysts expect ARM and MIPS to continue their domination of these sectors, but the companies are starting to look more alike. MIPS has started to roll out low-power designs and ARM is moving into high-performance. MIPS has already had some success. In July, the world's largest smart-card producer, Gemplus, agreed to use a MIPS design. This agreement should be extremely lucrative for MIPS over a several-year period, since the market for smart cards is expected to grow into a multi-billion-unit market. ``There's such tremendous growth in smart cards, communications devices and Internet appliances that there's more than enough room for both companies,'' says Erach Desai, an analyst at CS First Boston. A Desert for New Competitors Analysts expect few new competitors to enter the field because there is already a rich ecology developed around each standard. ``Both of them have done very well in setting up a full delivery vehicle for their intellectual property.there's a whole system of testing, drivers and code for external links that makes it very easy for chip makers to use MIPS or ARM,'' says Desai. So then why is MIPS a better buy? While ARM trades at close to 200 times next years estimated earnings, MIPS trades at 53 times. Although the numbers aren't entirely compatible because of differing fiscal years, it's clear that MIPS is much cheaper. An explanation may come from ARM's trading location. ``ARM is valued higher, partly because it trades in London, and they are starved for tech companies,'' says Garo Toomajanian, an analyst at Dain Rauscher. That said, ARM should grow earnings at a much faster rate over the next year. While ARM's royalties should expand quickly, MIPS earnings should grow only slightly due to a shift in the video-game market. Toying With Middle-Aged Men MIPS became a real business largely on the back of the Nintendo 64 game platform. MIPS received a sweet deal, with a royalty on every game cartridge in addition to each machine. As a result, MIPS still receives revenue from an essentially obsolete game console, where sales of the systems themselves are slowing while the installed base continues to buy games. In the quarterly results reported Thursday, 26% of all MIPS revenue came from Nintendo. But this revenue is dropping quickly. Luckily for MIPS, revenue from Sony's (NYSE:SNE - news) PlayStation 2 should more than make up for the loss. It's rather obvious how omnipresent the PlayStation 2 is going to be, selling briskly in Asia. And despite some teething problems, Sony has already sold 3 million of the American version of the machines ahead of the Oct. 26 US launch. Middle-aged men in particular (according to my extremely informal survey) seem anxious to get their hands on the combination game console/DVD player. The PlayStation 2 actually uses 3 MIPS cores. The first is on a chip by LSI Logic (NYSE:LSI - news) that lets users play old PlayStation games. The other two are on Sony's new chip; in order to make a 128-bit processor, Sony combined two 64-bit MIPS-based processors. ``Although they don't get revenue for each cartridge, there are going to be so many consoles sold, that they'll earn more from Sony than they did from Nintendo,'' says Desai. Desai warns that this won't happen overnight. He predicts Sony console revenues will reach 11% of total revenues by next June and continue growing in 2002. By that point, royalties from smart cards and the like should be growing strongly as well.