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4-Traders Homepage  >  Equities  >  London Stock Exchange  >  ARM Holdings plc    ARM   GB0000595859

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ARM Holdings Security Venture Stirs Up Competition With Intel

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04/03/2012 | 09:46pm CEST

--ARM Holdings unveils new security joint venture

--New company will compete with Intel and its McAfee unit

--Intel has a lead over ARM in security, analysts say

   By Shara Tibken 

ARM Holdings PLC's (ARMH, ARM.LN) push into mobile device security opens up a new front with Intel Corp. (INTC)--one where the U.K. chip designer lags behind its larger rival.

ARM, which designs the processor architecture that powers most smartphones and tablets, said Tuesday that it will establish a joint venture with two European companies to accelerate adoption of a common security standard for mobile devices and game consoles, aimed at making online transactions safer and easier for consumers and businesses.

The new company will provide software that integrates closely with ARM-based chips, sitting underneath the operating system and closer to the silicon to make the device more secure.

"The venture provides the linkage between hardware with the right security built in and the service provider ecosystem that really wants to make use of that but doesn't want to deal with the diversity and difference between all the platforms," said Ben Cade, the ARM executive tapped to run the joint venture. "The idea is to deliver the services you as a consumer want on any devices you want."

The move echoes the strategy behind Intel's $7.68 billion acquisition of security-software provider McAfee. At the time of the deal, Intel executives argued that growing security dangers required new measures, such as designing chips and other hardware that can protect systems better than software alone. Intel's resulting DeepSAFE security product also sits below the operating system.

"This is an absolute defensive move against Intel, and what they're doing with McAfee," said Patrick Moorhead, analyst at tech research firm Moor Insights & Strategy. "ARM is playing catch-up here."

Cade said the technology is similar to that offered by Intel and McAfee, but the philosophy differs. Rather than providing the entire product, from the hardware up to the software used by the consumer, ARM plans to provide the "low-level capabilities" that can be leveraged by security providers. For example, they can allow companies to get rid of hardware authentication tokens.

"What we aren't doing in this venture is going into the enterprise security market," Cade said.

Intel spokesman Jon Carvill, meanwhile, said Intel "put a significant stake in the ground" regarding the importance of security with its purchase of McAfee. "We've continued to make aggressive investments in this area, and it's no surprise to see others in the market follow suit," he said.

Intel shares, up 43% over the past 12 months, slipped 1.4% to $27.99 in recent trading. ARM shares trading in New York, up 3.3% over the past 12 months, slid 16 cents to $28.85.

Intel, whose technology powers most personal computers, has struggled for years to move that technology into smartphones. The majority of mobile devices use chips from companies that license designs from ARM, which draw little power and offer longer battery life in portable devices.

Intel believes it has just about reached power-consumption parity with ARM-based chips and has some performance advantages with a new product, code-named Medfield. Several handset makers, including Motorola Mobility Holdings Inc. (MMI), have announced plans to use Intel chips in their mobile devices. At the same time, ARM-based chip providers such as Nvidia Corp. (NVDA) have set their sights on Intel's core PC and server markets.

While Intel may be lagging behind ARM in supplying chip technology for phones, it does have an advantage when it comes to security, analysts said. Along with the DeepSAFE product already announced, Intel has formed partnerships with Visa Inc. (V) and MasterCard Inc. (MA) to help secure online shopping and mobile payments.

Stifel Nicolaus analyst Kevin Cassidy said Intel's deal for McAfee, reached in August 2010, was a smart way to gain traction in the mobile market. He noted a chip has to be significantly better to replace an incumbent processor, and security is one factor on Intel's side.

"We saw security as one of the reasons why someone would want to switch from ARM to Intel," he said. "And Intel has an advantage over ARM because it can have the same security built into the data center."

Cade, meanwhile, said the joint venture's technology already works with some mobile devices on the market, enabling features such as streaming high-definition video through Netflix Inc. (NFLX).

"We've had the technology for probably seven years," he said. "Only now is the right time to set this up and really significantly increase our investment. The services are there. The need is there. Protection isn't."

-By Shara Tibken, Dow Jones Newswires; 212-416-2189; shara.tibken@dowjones.com

--Jessica Hodgson, Lilly Vitorovich and Andrew R. Johnson contributed to this report.

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Financials ( GBP)
Sales 2016 1 163 M
EBIT 2016 559 M
Net income 2016 430 M
Finance 2016 1 057 M
Yield 2016 0,63%
P/E ratio 2016 55,15
P/E ratio 2017 45,24
EV / Sales 2016 19,4x
EV / Sales 2017 17,6x
Capitalization 23 615 M
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Mean consensus HOLD
Number of Analysts 23
Average target price 12,9  GBP
Spread / Average Target -23%
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Simon Segars Chief Executive Officer & Executive Director
Stuart John Chambers Chairman
Graham Budd Chief Operating Officer
Christopher John Kennedy Chief Financial Officer & Director
Michael P. Muller Executive Director & Chief Technology Officer
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ARM HOLDINGS PLC61.50%30 946
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