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Ref No: 1276
ARM Holdings PLC
Contents
1.6 Subsidiaries, Investments and Joint Ventures. 12
2.1 The Board of Directors. 16
2.3 Board tenure and succession planning. 19
2.5 Executive compensation. 20
3.1 Global Economic Outlook (970) 21
4.2 Porter’s 5 Forces Analysis. 32
5.0 Company Analysis (1550) (16th) 36
5.3 Company’s Cost of Capital 40
7.2 The Dividend Discount Model (DDM) 53
7.3 The Discounted Cash Flow Model 54
7.4 The Discounted Abnormal Earnings Model 55
7.6 Valuation based on price multiples. 55
1. Company Overview
1.1 Introduction
ARM Holdings PLC, established in 1990 has its origins in Britain and likewise has its headquarters in Cambridge (England) and is a multinational company. Furthermore, the company is listed on the London Stock Exchange FTSE 100 index; while, it’s secondary listing is in NASDAQ. ARM Holdings specialises and leads in the supply of intellectual property pertaining to semiconductors, where the company works for the development and licensing of the very technology that is used in multitudinous digital devices ranging from tablets and smartphones to sensors and servers. The technology developed by the company relating to microprocessors reinforces the notion of globalisation as it helps to connect individuals with each other in both professional and personal manners. Additionally, the company also develops development tools for software under its multiple brands including RealView, Keil and DS-5 (Reuters, 2015; ARM Holdings PLC, 2015a). The Imagination Technologies, Intel and AMD are competitors of ARM Holdings PLC in relation to CPU; while, Qualcomm (Adreno), Imagination Technologies (PowerVR), Intel and Nvidia are its rivals in the area of GPU (Daily Tech, 2014; Lazure, 2011).
ARM’s Ecosystem
The vision of the company to create a technology that makes devices more capable, smart and at the same time energy efficient is in part fulfilled by the excellent ecosystem that the company has developed with its customers and partners for the purpose of innovation. The uniqueness of this ecosystem draws from the fact that it provides the manufacturers of devices to obtain virtually all the wide ranging technology via it. The company works to constantly update its ecosystem by adding new relevant partners in it as new technology comes into view, and in the process have created non-profit entities, discussed plans regarding technology for alignment, employed technology from various partners for testing, etc. (ARM Holdings PLC, 2015b).
ARM’s Corporate Responsibility
Moreover, the company works proactively to become a business that takes corporate responsibility of its action and in this regards, the company has monitored and reduced its carbon emission and has worked to gather data regarding the water it consumes and the waste it produces, both of which are found to be trivial. Also, the company claims to have paid attention to each part of its operations so that efficiency in energy could be promoted in each of these. Additionally, during the construction of its buildings, the company made sure via consultation that the material and energy consumption in these buildings were environmentally acceptable. In terms of its social contribution, the company supports educational initiatives particularly in the area of engineering; also, an initiative taken to design technology for the developing world is supported by the company. Next, the company also engages in researches so that a technology that is increasingly energy-efficient can be developed. Finally, the company contributes, often through its employees to a charitable organisation for the betterment of its local communities (ARM Holdings PLC, 2012).
1.2 Business Review
According to Arnold (2012), business review helps in the assessment of the success of the company and as such should include both the financial and operational elements. Likewise, the financial and operational performance of ARM Holdings PLC shows positive growth over the year from 2013 despite slow revenue in the first half of the year as can be seen below where both the licencing and Royalty revenue have increased by 30% and 8% respectively and so has the earnings per share and dividend by 17% and 23%, indicating a positive outcome for investors.
Figure 1: Performance Overview of ARM Holdings PLC
(Source: ARM Holdings PLC, 2015a)
In addition, the company reports that it has been able to deliver the best despite the ever-changing and fiercely competitive environment. This is substantiated by the fact that in the year 2014 alone there were shipments of 12 billion chips that were ARM-based; while there have been total shipments of 60 billion chips. Of the chips that have been shipped in 2014, a major part has been used for cellular devices like tablets and smartphones, indicating a high market share of the company in this area. Nevertheless, shipments also went into novel markets of embedded intelligent devices and enterprise networking infrastructure (ARM Holdings PLC, 2015a; ARM Holdings PLC, 2015c).
1.3 Strategy
A business strategy sets out the plan that a business uses to accomplish and attain its business aims and objectives (Stimpson and Farquharson, 2014). ARM strategizes to collaborate with different companies that work on the very basis of innovation so, that, a technology that saves energy while giving the maximum output is developed which also creates a world, where individuals are more connected (ARM Holdings PLC, 2014a). ARM Holdings PLC (2014a) includes regarding its strategy where it aims to spur innovation by utilisation of technology that is energy-efficient so that shareholders can be provided with augmented returns; this, the company plans by investing in growth that is meant for the long-term. The strategy…
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