Should We Buy ARM Holdings plc As It Targets ‘Everything’?

If ever a company was embedded in the culture and trends of modern life, that firm is ARM Holdings (LSE: ARM).

ARM is everywhere

The firm reckons that 50 billion or so ARM- based products touch around 75% of people in the world, and manufacturers continue to pump out more than 2.5 billion new items loaded with ARM technology every quarter. In one example, something like 95% of all smart phones by all manufacturers contain ARM chip designs. The figures stagger. ARM remains on-trend and firing on all eight cylinders.

The firm describes its vision as enabling people and devices to connect in ways that have never been possible before. As we all continue to migrate to mobile data-transfer devices, ARM looks like it’s riding the crest of a powerful wave.

The next big conquest could be the so-called Internet of Things. ARM predicts its technology will drive an emerging hyper-connected environment of smart appliances, smart cars and smart everything, controlled by you and me from our whizzy-dizzy mobile devices. Whether such mobile devices remain discrete or are wearables makes no difference to ARM, whose technology is already in a high proportion of everything produced in both varieties.  

Targeted acquisitions

ARM is serious about its Internet-of-Things presence and demonstrated that once again in November with a themed acquisition. Offspark BV, based in the Netherlands, cost ARM £1.2m.  It provides specialised services in online security, secure hardware, software, and practical cryptography.

Such capabilities dovetail with ARM’s 2013 acquisition of Sensinode, a company located in Finland. Sensinode pioneered software for low-cost, low-power internet-connected devices –perfect for Internet-of-Things developments. That acquisition gave ARM Sensinode’s expertise and technology and turbo-charges ARM’s plans for rapid deployment of new and innovative Internet-of-Things applications.

Offspark BV and Sensinode were not the only acquisitions ARM made during 2013 and 2014, but they sent a powerful message of intent to shareholders — I’m listening!

What next? 

ARM delivered its full-year and fourth quarter results yesterday. There’s only one question on everyone’s lips with a highly rated growth company like ARM — ‘is growth still on track?’

You bet! Focusing on the final quarter of ARM’s trading year we see normalised revenue in pounds up 19% and earnings per share up 36%. As we’ve become used to, there’s nothing to worry about there. I’m encouraged by the actions ARM is taking to drive future growth with these acquisitions.

With ARM Holdings so tuned into a pragmatic vision of the future and so engrained in the ever-rising importance of our digital lives, the growth story seems far from over. In fact, I’ll even go as far as to venture that we may yet see another spurt of exponential success with this mega-chip designer.



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Kevin Godbold owns shares in ARM Holdings. The Motley Fool UK has recommended ARM Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.