Tag Archives: ARM

My take on ARM Holdings plc

ARM is growing up and has considerable brand value to add on as it matures, on top of the value it adds as it grows by revenues and profit.

The April 2014 multiples were fairly high, then there was a correction of 12.5% below 5 year trend line.

But my target for ARM’s share price in 4 year’s time is £25-£30+, hitting these levels in at least one pre-emptive spurt before that time, given the typical volatility of the price.

Why, in summary?

I assume conditions remaining roughly the same in the longer run in terms of attitudes to financial ratios. The company will likely grow at least 20% a year given the market outlook for the current and new areas it sells into. On top of all that, it will add intangible value like better-known global electronics and ICT brands have done (see E&T Magazine April 2014 for brand value increases in electronics and IT). This intangible brand value will affect the share price directly, but may also help maintain or increase royalty and licensing fee rates that ARM can command.

Top 6 reasons:

ARM…
1. has a beautiful business model involving tech licensing and royalties in high barrier, deep tech.
2. is yet fully to exploit its brand and go confidently shoulder to shoulder with the big guys who have the big, rapidly growing brand values in electronics and ICT. But it is beginning to do this through market diversification, corporate marketing, supply chain management and internal cultural development: remember Apple was its first customer!
3. has a beautiful strategy to push further into the markets it currently dominates (smartphones, which Analysts at IDC say is growing at 28.9% p.a.) – because those markets are still growing and the number of chips per phone is increasing while the phones get priced cheaper for global emerging markets.
4. is consistently growing itself on average at 15-20% a year, and has been for at least 4 years.
5. new markets are amazing, pretty much exponential, such as IoT (MCUs, radio, sensors, embedded) and ARM is better placed than anyone to exploit them and benefit from their general take-up.
6. any competitors that threaten are more likely to drive up the ARM share price if they succeed, as they might for a time be in a position to buy ARM, but it more likely that ARM will grow and become a feisty global brand, an icon of the knowledge economy in the next decade.
7. ARM’s price rose an order of magnitude in the past 5 years; these targets represent a considerable slow down in those timescales.
8. is investing not only in great R&D staff, but is also expanding its global marketing campaigns: innovation AND marketing.

So I am not moved by this little bump has happened because of a regrade by an investment bank and by a general forum about tech share levels. They bear no resemblance to 1999 in absolute financial ratio terms; and ARM bears no resemblance to a revenueless, USP-less dotcom.

In the big picture, you have a superb business, and the medium-term is looking excellent.

About CIR

Cambridge Investment Research (CIR Strategy) is an independent consultancy trading since 2002. Its Company Director, Justin Hayward MMath MBA PhD is invested in ARM. Justin Hayward, 45, is a former Hawking PhD student (early 90s) and a former Deutsche Bank quant relative value analyst (late 90s).

This note is not a recommendation to buy or sell a security.

Programme Lineup for Smart Homes 2013 Cambridge, 5 November

The 8th Smart Homes & Cleanpower Conference 2013 Expo (SHCP13 | Bookings) will take place at Buckingham House Conference Centre, Murray Edwards College, Cambridge University CB3 0DF on 5 November 2013, and the forum will discuss the above questions in pleasant and relaxed modern conference surrounds. An excellent lineup of speakers has been arrayed covering a unique range of related topics. Generalise & thrive!
Smart Homes Conference 2013 – 5 November Cambridge

Opening Session – Connected Intelligence, Water, Energy, Things
10:00 Justin Hayward, Director, CIR Strategy, Introduction
10:05 John Riley, Head, Digital Policy Alliance, Chairman’s Opening Remarks
10:10 Bryan Lawrence, Solutions Marketing Manager, ARM Ltd Lead Sponsor
Empowering your home: realizing efficiency, comfort and security
10:25 Robert Brunbäck, CMO, Telenor Connexion AB
The Smart Home: from Vision to Reality
10:40 Ian Ellerington, Head of Innovation, DECC
Energy Innovation Programme
10:55 Steve Kaye, Head of Innovation, Anglian Water, Gold Sponsors
Innovations in water
11:05 Panel with Chair, & Marco Pisano, ESCO, followed by coffee break
Session 2 – iWATER – Water Technologies
11:40 Linda Berkshire, Anglian Water
Water & customer experience
11:50 Laurie Reynolds, Director, Aquamatix
Connecting the Water Industry to the Internet of Things
12:00 Adam Burrows, I2O Water
Under Pressure: advanced management technologies
12:10 Marcus Fowler, Tynemarch
Hands to the pump: total control software
12:20 Paul Glass, Anglian Water
In-house displays & devices for water
12:30 Panel with Steve Kaye, Head of Innovation at Anglian Water
13:00 Rapid Innovation Pitches CIR Strategy & Venture Partners
13:10 Lunch and joint networking with HVM Graphene Stream
Session 3 – iHEAT – Homes Energy & Technology
14:00 Graeme Hodgson, Project Manager, Hitachi Europe, Gold Sponsors
Strategy for  Smart Communities
14:15 Andy Nowell, Technical Director, Sentec Ltd
Home Energy metering
14:30 Andy Heaton, CEO, EnModus Ltd
Connectivity in the smart home – Winner Takes All or Horses for Courses?
14:40 Russell Haggar, CEO, Xsilon Ltd – Dependable M2M & Case Hanadu
14:50 Chris Wright, Founder, Moixa Energy – Distributed systems: time shifting DC & lighting load
15:00 Panel with Graham Ford, Mansion Partners & Tea break
Final Session – Smart Homes & IoT Entrepreneurship
15:40 Adam Gould, CEO, ARM Sensinode
Introduction to IoT for Smart Homes
16:00 Amir Chaudhry, Founder, Nymote.org
Dumb homes, smart people: generational systems for IoT
16:10 Ben Kott, CEO, EnergyDeck Ltd
A Powerful platform to reduce energy cost
16:20 Usman Haque, Founder & CEO, Umbrellium Ltd
Empowering smart citizens
16:40 Pilgrim Beart, Founder Director, AlertMe
Smart Homes At Scale
17:00 Plenary panel with John Riley, Head of UK Gov Digital Policy Alliance, then Chair Summary
17:30 Networking Drinks

8th Smart Homes & Cleanpower Conference 2013 Expo (SHCP13 | Bookings)

Please call us on 01223 303500 for bookings or more information.