All hail Arm Holdings, the chip-maker whose product is being adopted by Microsoft for the new version of the Windows operating system. The firm is one of the few dotcom darlings from the 1999-2000 era that has returned to the FTSE 100 index and prospered.
Remember those days? Arm was briefly valued at £10bn. Even now, after global success, it is worth "only" £6bn despite being priced at 30 times expected 2014 earnings, according to one analyst's forecast. Today's valuation is clearly more sober than the turn-of-the-century price. But 30 times earnings?
Arm's chips are state-of-the-art but the firm doesn't produce miracles.
Comments in chronological order (Total 6 comments)
6 January 2011 9:22PM
You're pretty beat up on overvalued Tech stock Nils - what with your criticism of this and Facebook... it's as if 2008 never happened and you still believe in the efficient-market hypothesis.
A stock's price does not reflect the value of the company, as people like yourself (or indeed myself) who believe a company like ARM to be overvalued will still buy shares if we believe others will also.
7 January 2011 12:04AM
ARM has also saturated its own market - by emphasising up front license fees to silicon vendors rather than royalty fees for each time an ARM product is fabricated in silicon.
Some in that company once proudly boasted that more ARM processors were manufactured than Intel processors. That's as maybe - but ARM's revenue and profits will always be dwarfed by the Intels, Toshibas, STs, LGs, Samsungs etc of this world.
The trouble with the Microsoft deal for ARM is that Microsoft's operating systems have not sold well in mobile applications - not because of any issues porting to one processor or another - but because their operating systems did not scale as well as their competition.
Given that ARM has tried to keep the license gravy train running by bringing out ever more complex processor designs - the logical end result is that they end up just competing with Intel, AMD etc for "me-too" designs, but inevitably getting less revenue than their competitors because of their business model.
7 January 2011 12:07AM
When everybody else is buying a stock that they all know is hugely overvalued, just because the clamour for shares is driving the price ever upwards - that's the time when I would sell.
It's worth reading Malcolm Balen's account of the South Sea Bubble: "A Very English Deceit"
7 January 2011 12:09AM
Couldn't they have found someone who didn't chew their fingernails to demonstrate that chip?
7 January 2011 12:22AM
But, crucially, it's no longer when the main actors in financial circles would sell... they play it to the last minute; like a crazy game of chicken. They do not care for the intrinsic "value" of the company, only for how much money they can make out of the trades. The whole bonus-centric culture is geared around this idea of making as much money as possible by gaming - the simplistic view of the efficient-market hypothesis does not take this into account and means that bubbles will naturally form as a consequence of this intrinsic instability... from what we have seen these bubbles are becoming more and more amplified, perhaps as a result of leverage, or even more worryingly when people start to believe the underlying values - as with House Prices, ARM, Facebook - because the bubbles go on for so long. So yes, I predict ever bigger bubbles - the next dotcom crash may well be worse than the first.
7 January 2011 7:45PM
Er no.
Tomorrow, hey city people, wake up and realise Mr Ballmer's snake oil won't make that trading desk software run on a wPad or whateverPlatform.
No problem of course, "Windows 8 errmmm Window Mobile 8 i meant really" will say Mr Ballmer. Ha ha just getting a little carried away now eh?
Calm down everybody it ain't gonna happen. Windows PC is Intel & AMD and stay that way. Betcha it'll never make double figures before Windows Death.
Windows Live, Windows Server, Windows Media/Xthingy, Windows Phone all super-computing ARM no prob. But Windows x86 3rd party software (sorry can't call them "Apps") nowhere to go i'm afraid. Intel 64bit has already cost them dearly so don't expect an ARM migration anytime soon. Life is not a simple cross-compiler job even if those nix guys made it all look so simple.
The future on your ARM is a fast-booting mean and lean OS running mean and lean Apps with a large amount of back-end processing moving to the cloud. So get real. Everyone invest in ARM but for the right reasons and don't expect a Start button.