Last updated: January 6, 2011 8:45 am

Microsoft links with Arm in tablets move

Arm Holdings is the pin-up for the UK technology sector, writes Mary Watkins in London.

The Cambridge-based group, whose chip designs feature in electronic devices made by international brands such as Samsung, Sony, Nokia and Apple, has seen its share price rise by more than 150 per cent in the past 12 months as investors bet big on the group’s growth potential.

On Thursday its stock rose as much as 13 per cent, after Microsoft told attendees of the Consumer Electronics Show in Las Vegas that chips designed by Arm would run a new version of the Windows operating system.

Steven Sinofsky, president of the Windows and Windows Live division, revealed that Microsoft would be rolling out a new class of lower-powered chips based on Arm designs and made by Qualcomm, Nvidia and Texas Instruments as part of efforts to widen Windows beyond basic personal computers to portable devices.

Lee Simpson, analyst at Jefferies, said that the market had long anticipated that Arm-based chips would feature in a new version of Windows for portable devices and had priced that into the stock. However, he said the official announcement was likely to keep feeding into the share price. A move into PC chips will enable Arm to command higher fees for each chip sold.

The move is a boost for Arm, whose low-powered chip designs feature in 95 per cent of mobile phones sold around the world and in a range of other products but have made relatively little headway in the higher-power computer chip segment where Intel dominates.

Following the announcement by Microsoft on Wednesday, graphics specialist Nvidia also said that it would be developing a new Arm-based core processor for desktops and servers. Warren East, its chief executive, has said that the company expects to benefit from a predicted leap in demand for tablet computers.

The success of the iPad has prompted companies including Toshiba, Motorola, Research in Motion and Hewlett-Packard to rush to bring out their own tablets.

Microsoft said Arm-designed chips would not start to be seen in new devices for another two or three years. Arm’s chips currently feature in a version of Windows that runs on the US group’s smartphones. In July, Arm signed a deal with Microsoft to extend and expand on an existing long-running licensing agreement. The deal gave Microsoft access to Arm’s core architecture, rather than licensing one product at a time. Microsoft had until quite recently relied on Intel to supply most of its chips, though it has been widening its relationships with other chipmakers and designers.

Shares in Arm closed up more than 2 per cent at 482p.

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