ARM Holdings (LSE: ARM) just announced an initiative designed to bolster and build upon the firm’s presence at the heart of the so-called Internet-Of-Things (IOT) opportunity.
The new IOT Subsystem for Cortex-M Processors aims to integrate ARM’s existing processor intellectual property (IP), its physical IP and its connectivity capabilities with a new product — Cordio Radio IP — to create a must-have subsystem aimed at making sure future generation IOT devices are designed with ARM technology inside.
Building moats
Once again, ARM displays the forward-thinking credentials that keep its economic moat strong as the firm moves to capture the latest trends and commercial opportunities of the day.
The Internet Of Things labels a vision where perhaps billions of devices and things will be connected in the world around us. ARM talks about wearable devices, smart cities, smart homes, all linked together with cloud computing — ARM technology will make it all work.
The firm’s IP already drives many IOT devices, so it seems likely that the new Subsystem will gain wide acceptance amongst device manufacturers. The beauty of ARM’s new off-the-peg IOT technology offering is that customers can use it to optimise their product solutions by adding their own sensors and peripheral devices.
When ARM has gone to such trouble to perfect a readily available IOT subsystem, why would any individual device manufacturer wish to spend millions developing their own solution or try to cobble together their own subsystem from other suppliers?
Focused on IOT
There’s no doubt that ARM has a firm focus on the emerging IOT opportunity, and when we think about the size of the potential market it’s easy to see why. A series of IOT-related acquisitions, and this consolidating IOT Subsystem, should keep the firm right in the middle of the potential wave of growth as it develops.
Although the firm always looks expensive on price-to-earnings multiples, there’s good reason for that — ARM keeps delivering on growth. Accelerating penetration of fast-growing markets, such as the Internet Of Things, means ARM Holdings could shoot up higher still, I estimate to £15 and beyond over time. After all, although the firm is taking it very seriously, the Internet-Of-Things opportunity is just one area of growth. ARM already enjoys a powerful position in the mobile device market such as smartphones, laptops and tablets, and in other areas as well.
