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Shares fall on Arm takeover

Nice fit, but too expensive, reckons City

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British chip designer Arm is to buy Silicon Valley's Artisan Components in a deal worth over $900 million in a cash plus stock deal. Artisan licenses physical component designs to over 18 chip manufacturers, and to integrated circuit design teams at over two thousand companies. Arm argues that it will broaden its sales channel with the acquisition. Arm licenses a RISC chip core and instruction set widely, with growth in recent years being fuelled by mobile phones.

Arm has made small acquisitions before - the most recent, of Belgian designer Adelante Technologies last year for its embedded signal processing - but never on a scale like this. Despite a cash pile topping $300 million, the City fretted that Arm is paying too much for its new partner. In the half year that ended in June, Arm Holdings earned £71.9 million, or $127.6 million. That's up fifty per cent from the same period last year, and with Arm being a design and licensing operation, it boasts gross margins of over 90 per cent. In the twelve months that ended in June, Artisan earned profits of $63 million of income of $82.9 million.

Arm shares fell 18 per cent. The two companies hope to tie up the deal in the fourth quarter of the year. ®

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