Apple is kind of like the Scrooge McDuck of the computer industry. Thanks to the huge margins they charge on products they have a massive vault just full of money. It is particularly full right now thanks to another fabulous quarter in which Apple made a profit of $3.07 billion dollars. So, what to do with the money? Buy some Bugatti Veyrons? Or perhaps buy another chip maker?
“A deal would make a lot of sense for Apple,” said one trader. “That way, they could stop ARM’s technology from ending up in everyone else’s computers and gadgets.” Traders reckon a bid would come in at around 400p a share, valuing ARM at more than £5.2 billion.
The takeover speculation was fuelled by stellar second-quarter figures from Apple last night smashing Wall Street‘s forecasts. This was good news for ARM even without a bid, because ARM pockets royalties from the sale of iPads.
That’s an interesting bit of speculation. Does it make sense? Yes and no. On the one had, there is no doubt that Apple has been buying up hardware talent lately, both in the form of people and companies. Despite having succumbed to using Intel processors like everyone else, Apple isn’t taking that as an admission on defeat in the hardware world. The chip in the iPad is Apple’s chip, and Apple alone. Considering how Apple likes to control things, this is a big deal to the company.
But some of the speculation doesn’t make sense. It isn’t really clear why Apple would want to stop ARM technology from ending up in everyone else’s computers and gadgets. ARM is sort of a competitor, but it isn’t as if they’re currently giving Apple a black eye. The question with any speculation about a purchase is “what problem would this solve?” ARM isn’t a problem for Apple. Also, ARM does not manufacturer its own processors, so Apple would only be purchasing intellectual property.
Even so, this is an interesting rumor because of the serious implications it would have were it to occur. ARM chips are currently positioned as a competitor to netbooks in the future and are also used in a huge number of mobile phones, GPS devices, HDTVs, and much more. If Apple were to take over ARM it would suddenly put one of the world’s most popular processor design companies in the hands of a very controlling company. Would Apple still license ARM designs, or would they want to hog it all for itself? If the later, the entire electronics world would have to scramble to find a new source of small, low-power chips.
*UPDATE*
It seems that ARM’s head hancho, Warren East, has denied that there is any truth to the rumors. He brought up the fairly simple point that I outlined earlier – ARM is an IP company, not a manufacturing company. Apple can simply license any technology they need from ARM, so buying ARM wouldn’t be of much benefit.
I really think that this was just a bunch of investment crap used by traders to make the stock price of ARM skyrocket. And it certainly worked.
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