ARM Holdings plc is likely to see further royalty growth pressures ahead as Intel Corp step up their presence on traditional ARM turf.
ARM Holdings plc (LON:ARM) has potentially been dealt a further blow to future royalty growth thanks to the release of a new competitor product to the market.
At MWC yesterday Intel Corporation (NASDAQ:INTC) launched its next generation LTE modem, the XMM 7260 as well as its new application processor, Merrifield.
"We see the XMM 7260 as being especially significant given that has similar specifications as Qualcomm's leading edge solutions. It is a cat 6 modem covering 30 bands and providing carrier aggregation," note Liberum Capital in an initial analysis of the event.
Liberum suggest Intel believes that it will be a clear no.2 in the LTE modem market by the end of this year through customers like Samsung, Lenovo, Asus, and Dell.
"We believe the lack of a competitive LTE modem was a key factor in Intel's lack of success in the smartphone market so far. The XMM 7260 is likely to have a relatively high apps processor attach rate, particularly outside Samsung. Intel also remained comfortable with it's targeted 40mn tablet shipments this year but did not provide any targeted shipment number for smartphones," say Liberum.
Liberum believe the introduction of Merrifield, the XMM 7260, as well as the integrated solution expected to ship in H2'14 should enable Intel to gradually gain share in smartphones as well, similar to the trend already visible in tablets.
"This is expected to put further pressure on ARM Holding plc's (ARM) royalty growth, amidst already slowing trends in smartphone and tablet demand," says an analyst note on the matter.
Liberum maintain their Sell rating on ARM shares.
Markets in the red on Tuesday
European equities have started the day with a modest pull back as traders turn cautious over recent gains.
"Despite the bullish slant to sentiment, traders are wary about these levels as it was only a month ago that we were on the same trajectory when all of a sudden emerging market jitters became a prominent issue and slammed the bulls to the floor," says Jonathan Sudaria at Capital Spreads.
Recent data has been mixed but the bulls have been quite content to shrug off the negative and rally on the positive.
"However, as markets teeter around new highs again bulls will be looking over their shoulders for any geopolitical risks hurtling towards them. With alleged reports that Russia is beefing up its military presence at Sevastopol, maybe traders have a sense for trouble in Crimea?" says Sudaria
A rally in US healthcare stocks drove the Dow Jones 92 points higher yesterday to 16,205, a level which denies almost completely the sharp selloff seen at the end of January.
Sudaria reckons Investors seem more at ease about the US economy being healthy enough to sustain stimulus cuts and for now are willing to focus more on the positive side of the mixed data.
Although it tried to push higher in early trading, the euro finished near flat at 1.3735 against the US dollar on worries about inflation outlook in the common area. The data showed consumer prices remaining below 1% and the ECB already promised it stands ready to add extra monetary stimulus to address the issue especially when its mandate focuses on price stability.