ARM acquisition opens up potentially huge market

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In a small, but telling and potentially significant, deal ARM Holdings has announced the acquisition of the Finnish company Sensinode for an undisclosed sum.

While the deal is likely to bring in relatively insignificant extra revenues in the short term in the context of ARM’s annual sales last year of £576.9m (US$896m), it seems to be important on a number of strategic fronts.

ARM has historically been reluctant to make acquisitions, relying on the quality of its own technological innovation to drive organic growth. One can perhaps make too much of the fact that the new chief executive Simon Segars has completed a deal within only seven weeks for taking on the role, but the nature of the acquisition speaks volumes about his strategic priorities.

ARM’s growth in recent years has primarily been driven by licensing powerful microprocessors for use in smartphones and other mobile devices – it shipped around 8 billion devices last year, and it dominates the smartphone market.

But even the last chief executive Warren East missed few opportunities latterly to tell investors that he foresaw a strategic shift, away from such powerful processors to smaller chips to be used in a wide range of everyday appliances and devices.  Most analysts expect a great proliferation in the number of electrical devices that will be connected to each other via the Internet, with some experts talking of as many as 50bn devices being Internet connected by 2020.

Sensinode is a market leader in the nascent market of providing the software to enable such appliances to communicate with each other – the so-called “Internet of things”. In the words of Adam Gould, chief executive of Sensinode: “The Arm architecture together with Sensinode’s software technology will provide a compelling solution for internet of things developers.”

While there will no doubt be several billion dollar IT deals in the future, it would not surprise us if this almost unnoticed little snippet of news has more ramifications in the long-term for consumers than almost any deal for some time. Certainly it has the potential in due course to be a strategic venture of great importance to ARM.

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