ARM(LSE: ARM) is on the move. The company recentlyannounced that the 50 billionth chip containing an ARM processor had been shipped by partners. Now management is targeting the next milestone 100bn chips shipped.
Key component
A key part of ARM
s plan to hit the 100bn barrier is the ARMv8-A technology. The company recently signed its 50th licensing agreement for this technology and a total of27 companies have signed agreements for ARMv8-A technology. This includes all of the top 10 companies who sell application processors for smartphones.
The ARMARMv8-A technology is designed for high power computing, in an age where tablets and smartphones are quickly replacing PC and laptops for many tasks. This involves a jump from ARMs traditional stomping ground of 32-bitcomputing to more powerful 64-bitcomputing. ARMv8-A processors are designed specifically for this purpose.
Connecting with customers
Alongside the development and release of new products, ARMhas begun to build a stronger relationship with analysts and clients, something it has shied away from in the past.
But now the company has realized that it would benefit from a better relationship with customers after all,chips bearing ARM designs now ship at the rate of 1bn per month. ARMis trying to build a relationship with new customers in theInternet of Things and enterprise infrastructure space two sections of the market that are expected to grow rapidly over the next decade.
However, ARMis not a well-known name in these two areas the bigger players,IntelandAMD, control most of the market. ARMis having push its way in to the market, which is one of the reasons management is now connecting with customers and analysts ARM is launching new products into a new market and management wants as many people as possible talking about it.
It wont be easy for ARM to break into this market. Indeed, as well has having to compete with well-established Intel and AMD products within the 64-bit space, Intel and AMD are trying to develop low-power chips that can compete on the same level as ARMs existing products.
Nevertheless, ARMs existing relationship with its customers and its reputation within the smartphone market should keep competitors at bay for time being.
Get in early
Theres no denying that ARM has been one of the UKs greatest growth stories of the past decade. However, at the moment the companys shares are expensive and the groups valuation leaves little room for error.
Right now ARM is trading at a forward P/E of 42. If the company misses lofty growth targets this valuation could come rapidly back to earth.
But there are other opportunities out there.The key, when searching for growth stocks, is looking under the radar. You want to get on board while the company is still an unknown quantity.
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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
