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The chips are down this morning as ARM Holdings (LSE:ARM) has made yet another bold move to wrestle for dominance in the microprocessor sector of the technology market. The share price of the UK’s leading Reduced Instruction Set Computer (RISC) processor-design firm was up 11.50 pence to 706.50, after having reached 735.00 in early trading.
ARM is the major participant in Bridge Crossing LLC consortium that announced the $350 million acquisition of the patent portfolio of MIPS Technologies. The portfolio consists of 580 separate patents related to RISC designs of the type for which the company was named, i.e., Microprocessor without Interlocked Pipeline Stages (MIPS). ARM will contribute $167.5 million to the consortium’s offer, giving it roughly 48% of the ownership rights to the patents.
In an entirely separate deal, another UK firm, Imagination Technologies (LSE: IMG), has acquired the operations of MIPS for $60 million. Some 160 employees and another 82 MIPS patents come bundled in the Imagination deal. Imagination will also be granted a license for the patents acquired by the ARM-led Crossing Bridge LLC. The Imagination share price was up 2.60 pence to 467.6, falling back after an early rise to 473.00. Imagination believes that, “The acquisition will further strengthen Imagination’s position and opportunities in mobile, TV/set-top-box, consumer, and other embedded markets, as well as increase its penetration into networking, infrastructure and other markets where MIPS has enjoyed significant success.”
The acquisitions, although potentially favourable to Imagination, may be a significant key to ARM’s strategic battle for the semiconductor chip technology leadership role across a broad base and growing range of products. Intel seems to have fallen out of favor with Apple, at least to some degree, leaving the door open for ARM.
Whilst ARM has virtually dominated the mobile device market with its designs that features faster and more efficient processing, the company has been forming stronger relationships that it hopes will give it a stronghold on the PC market.
In the “strange bedfellows” department, both Apple and Intel, owns shares in Imagination. It seems that for Imagination the deal is vital to staying in the game. For ARM and its consortium partners, its more like playing at a higher level. If Imagination wants to get into the smartphone market, not only will it have to wrestle with the muscle of ARM, but also against Intel, which is, in its own right, trying wrestle its way onto the smartphone main stage.
The Bridge Crossing consortium was established through Allied Security Trust which, interestingly enough, majors in buying, licensing, and selling patents is a strategic manner so as to protect its members from patent infringement litigation designed to disrupt member businesses. By acquiring the patents from MIPS, ARM and Imagination essentially “neutralise any potential infringement risk from these patents in the further development of advanced embedded technology.” Acquiring the patent rights through a consortium is much less expensive than settling a contested matter in court. In fact, purchase of the patents entirely eliminates the risk of future litigation and empowers ARM and Imagination to move forward without that concern hanging over their heads.
