Google as a new client sees shares of UK chip designer ARM soar

December 13
1:17 PM 2013

Investor optimism was high after a Bloomberg report about Google's interest in using British chip designer ARM Holdings Plc's technology for its own server processors saw the former's shares rise to as much as 5.7%. Reuters said in its report that a deal with the search giant could signal ARM's re-entry into the server market as a dominant player.

In March, ARM chief executive Simon Segars said he foresees big opportunities for the chip designer in servers, where it has been a late entrant. Moreover, the report said a potential deal between Google and Apple could threaten Intel's leading position in the server market as Google is one of the biggest server chip buyers.

ARM licenses its designs to companies like Qualcomm and Texas Instruments, whose chips are being used in mobile devices like Apple Inc's iPhone and Samsung Electronic Co's Galaxy devices. ARM receives royalties for every sale of a chip that uses its technology.

When asked by Reuters about the potential Google deal, ARM chose to be tight-lipped on the matter.

Jefferies analyst Lee Simpson said he is seeing companies who maintain massive server farms like Facebook and Amazon to use the designs of ARM in the next two years. The strength of the British chip designer in low-power processor design has allowed it to dominate in the mobile devices market, while Intel is leading by far as a chips provider for servers and personal computers.

Charles Stanley analyst Tom Gidley-Kitchin told Reuters."Since ARM chips for servers are cheaper, consume less power and require lower cooling compared with Intel chips, they would be very attractive for Google." The Google deal will also be beneficial for the search giant, as it will be able to pressure Intel into reduce low-power chips prices, thereby enabling it to have massive savings in the process for more capital expenditures, the report stated.

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