ARM (LSE: ARM) is on the move. The company recently announced 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 of 27 companies have signed agreements for ARMv8-A technology. This includes all of the top 10 companies who sell application processors for smartphones.
The ARM ARMv8-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 ARM’s traditional stomping ground of 32-bit computing to more powerful 64-bit computing. ARMv8-A processors are designed specifically for this purpose.
Connecting with customers
Alongside the development and release of new products, ARM has 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 the Internet of Things and enterprise infrastructure space — two sections of the market that are expected to grow rapidly over the next decade.
However, ARM is not a well-known name in these two areas — the bigger players, Intel and AMD, control most of the market. ARM is 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 won’t 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 ARM’s existing products.
Nevertheless, ARM’s existing relationship with its customers and its reputation within the smartphone market should keep competitors at bay for time being.
Get in early
There’s no denying that ARM has been one of the UK’s greatest growth stories of the past decade. However, at the moment the company’s shares are expensive and the group’s 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.