Tuesday, January 18, 2011

Arm Holdings: now worth an arm and a leg thanks to Microsoft

All hail Arm Holdings, the chip-maker whose product is being adopted by Microsoft for the new version of the Windows operating system. The firm is one of the few dotcom darlings from the 1999-2000 era that has returned to the FTSE 100 index and prospered.

Remember those days? Arm was briefly valued at �10bn. Even now, after global success, it is worth "only" �6bn despite being priced at 30 times expected 2014 earnings, according to one analyst's forecast. Today's valuation is clearly more sober than the turn-of-the-century price. But 30 times earnings?

Arm's chips are state-of-the-art but the firm doesn't produce miracles.


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