ARM Holdings, which has been at the game of IP marketing and licensing since 1983, has been immensely successful -- the most rewarded IP company on the planet.  In my view, it is a hot candidate for acquisition by a large OEM who will use the acquisition in a major strategic way.  It posses in its tech vaults the technology which is licensed to practically 95% of mobile phones.  On top of that, the company is well-oiled IP licensing juggernaut who understands the business on a worldwide basis -- something sorely lacking from other IP vendors.   Beyond mobile phones, ARM has its sights on smartcards, TVs and set-top boxes.

ARM came to this position by establishing a clear business and marketing strategy right from the start.  The fact that it managed to be at the forefront of the huge mobile phone boom did not hurt.

I say it would be a strategic acquisition because, while the company is profitable, it is not swimming in money.  One of the issues is that the British IP supplier makes only a pittance from licensing royalties for each unit sold -- albeit many units are sold.  For example, we estimate that it gets about $1.00 from each iPad sold -- a fraction of the $500 price tag.

As the Euro and the British Pound falter against a backdrop of the European debt storm, it will become very tempting at some point to make a bid for ARM, in my view.   Perhaps a USA giant with cash hoard where $5 billion will not make a giant dent in its financials will be able to command mobile phone industry.  

For now, ARM has seen its shares rise on speculation that Apple Computer may be a suitor.  Well, Apple is buying fables chip firms which have tweaked various ARM processors either for increased performance or decreased power consumption.  Apple has acquired two of these chip startups since  2008.  First, it bought PA Semi, a company which tweaked the ARM chip resulting in enhancements for the iPhone.  More recently, Apple acquired Intrinsity, another ARM licensee which developed a very low power RISC processor used in the iPad. 

Whether Apple can digest an British ARM is open to debate…many companies would have worries if that were to happen since Apple is a fierce competitor in hot areas like smart phones and tablets.

Intel is an obvious suitor…the largest chipmaker in the world which dominates the PC microprocessor business.  But, in the mobile business the company is like an elephant standing in quicksand.  For one thing, it has not focused on the razor edge margin chips for cell phones because it is used to the fat margins received from selling its CPUs to PC and server makers.  Even then, the Atom chip which is showing up in netbooks, tablets and future smartphones is still a year away from competing effectively on low-power with ARM processors -- a year is an eternity in the cell phone product cycle.  So, yes, an ARM acquisition, would launch the MPU powerhouse to the head of the class in the mobile industry.  But what will Intel do with ARM?  On the dark side there is the possibility that it would kill the ARM chips and push its Atom technology…for now, it is a guessing game with Intel which has not had a stellar record when it tried big moves outside its core competence area.

How about AMD?  Probably does not have the stomach to take on ARM after having its troubles integrating NexGen (1996) and the more recent ATI acquisition.

Motorola and Nokia are on my list of suitors who may have interest.  Nokia has a closer relationship to ARM as both their headquarters are in Europe.

And then there is Microsoft, laden with cash, looking for a way to slow down the Apple bandwagon.  It would be a bold move for the world's largest software company which has dabbled in the chip business on the periphery.   But then, the chip business is becoming more and more a software business and this dark horse candidate has the business savvy and dollars to shock the industry.