The tech sectors merger season is well under way, with two multi-billion dollar transformational deals being announced during the past two months alone.
In particular,NXP Semiconductors, a Dutch company that specialises in chips used in debit and credit cards, acquired smaller US rivalFreescalefor $11.8bn at the beginning of March. While,Intelis currently in talks to acquireAltera, a maker of programmable processors, in a deal likely to exceed $10bn.
Andits possible that ARM Holdings(LSE: ARM) could be the next company to announce a deal.
The logicbehind the Apple-ARM speculation is simple. Demand for Apple products remains at an all-time high and the company is struggling to keep up with demand.
ARMis Apples largest, and most importantsupplier. Indeed, while ARM itself does not manufacture Apples microchips, ARMs chip designs have been essential to Apples success. Whats more, the bond between Apple and ARM will only grow stronger over the next few years as Apple is planning toremove Intel from its supply chain.
With this being the case, analysts have begun to speculate that Apple is planning to acquire astrategic stake in ARM, to avert apossible predatory move on ARM, which could threatenApples future success.
The best technology
Apple is right to be concerned about a possible predatory move on ARM. The company is miles ahead of its peers in terms of chip design, and there are many companies that would be willing to offer a significant premium to get their hands on ARMs technology.
For example, ARM recently revealed anew processor blueprint with better computing performance, designed forsmartphones and tablets set to be launched next year. The new design is three-and-a-half times faster than comparable chips from 2014 and energy use is 75% less than competitors products.
Clearly, this is the kind of technology Apple will want to get its hands on to remain ahead of the game.
A high price
Analysts believe that Apple would have to pay around 15.00 per ARM share in order to acquire the kind of controlling stake it needs to block a move by another tech sector peer.
That being said, ARM is no stranger to takeover rumours, and theres no guarantee thatthis latest rumour has any substance behind it.
Still,ARMs earnings are set to grow 69% this year and a further 20% during 2016, so even if a deal doesnt emerge, ARM remains one of the best growth stocks around.
And if it’s growth you’re looking for,our analysts have recently identified a stockthat could driveathree-fold increase in salesin just5 years. We believethat this is one of the market’s hidden gems. Indeed, just like ARM, the company in question has a proven advantage over its peers and is led by a revolutionary management team.
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