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Rumored Acquisition Would Require Some Serious ARM-Twisting

By Erika Morphy MacNewsWorld ECT News Network
Apr 23, 2010 5:00 AM PT

A rumor that Apple is in talks to acquire embedded chip designer ARM has been gaining steam this week. The talk was tempered -- but only a little -- after ARM CEO Warren East told reporters there was no truth to it. The idea has developed a life of its own, and speculation as what Apple has in mind has continued unabated.

Rumored Acquisition Would Require Some Serious ARM-Twisting

It is easy to understand why the market would believe it -- or at least consider it to be possible: Google's recent acquisition of Agnilux has spotlighted the trend of companies bringing specialized chip designers in-house. It is only a short leap to speculate that competitor Apple would try to acquire ARM.

Certainly, the company is no stranger to strategic acquistions. It recently bought Intrinsity, which designs low-power static processors. In 2008, it purchased PA Semi.

Torpedo the Competitors

If Apple were to bag ARM, "it would give them an excellent IP portfolio and torpedo their competitors who might also use ARM's chips," Rob Enderle of the Enderle Group told MacNewsWorld.

Even if Apple tried to acquire ARM but failed due to antitrust objections from either the EU or the U.S., there would be a benefit for the computer maker, Enderle said. "It would throw a lot of competitors into turmoil -- so it wouldn't surprise me if they made the attempt."

Perhaps Apple is allowing the rumor to circulate just to do that type of damage, he suggested.

Ill-Conceived Proposition

It is the downside for ARM that that leads Nathan Brookwood, a research fellow with Insight 64, to conclude that the rumor is ill-conceived and highly unlikely to come to fruition.

"One of the reasons that companies like ARM or Intel or AMD -- all of whom sell chips with a particular architecture -- are successful is because they are perceived to be neutral," Brookwood told MacNewsWorld.

A chip architecture owned by a competitor would be a tough sell for a lot of customers, he observed.

"Let's assume you are HP and you have some ARM-based products and Apple as well has some ARM-based products," he said.

"With ARM a neutral company, the competition is fair. Now if Apple were to own ARM, certainly HP would have to wonder if Apple would steer its development in ways that would advantage Apple and disadvantage HP," he said.

It would certainly worry HP that if it were to consult with ARM over a product in its pipeline -- say, an iPad killer -- that 'somehow' word would get back to Apple, he suggested.

Also, HP would be loath to market any products with the ARM chip, as it would indirectly benefit Apple.

Hands-Off Attitude Unlikely

Apple could, of course, take ARM out of general circulation, which would cause a whole other set of problems -- problems likely to bring down regulatory scrutiny.

One only has to look as far back as the PA Semi acquisition for a real-world illustration, Brookwood noted. "They were developing chips that competed with Motorola. As soon as Apple acquired them, they took PA Semi out of the chip business and its customers were very unhappy -- including the U.S. government, which was using the chips in some military applications."

Apple eventually struck a deal to continue to supply the chips throughout the contract period, he said.

The possibility that ARM would allow itself to be acquired on the promise that Apple would not interfere with its operations is the most unlikely, Brookwood said. "Why would Apple want to own ARM unless it could direct it in certain ways -- ways that are probably detrimental to its competitors?"

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