Market Report: Arm is strong on Apple chip hopes
Thursday 12 September 2013
A pricey new smartphone was a reason to dislike Apple yesterday, so it was left to microchip designers to get the City excited. Apple's new smartphones all use 64-bit microchips, which is rather good news for Cambridge-based Arm Holdings.
Arm's 64-bit chips may mean higher royalty fees from Apple, and the popularity and success may lead to other devices also using these clever chips that make phones quicker and use up less battery.
Liberum Capital's experts said that Apple's use of the chip will "help compensate" Arm in the face of a move to cheaper phones that would have "put pressure on Arm's average royalty per chip".
Arm took the top spot on the blue-chip index and some traders even speculated that Arm could again become a bid target. The shares jumped 45.5p to 986.5p but are behind their all-time highs in May of 1,111p.
Mobile graphics microchip maker Imagination Technologies is also expected to benefit from Apple's new iPhone 5S, and it was 4p better at 306p.
Apple itself was faring less well. By the time the London market had closed It was off around 5 per cent. A raft of analysts, including Bank of America Merrill Lynch, Credit Suisse and UBS, downgraded it to neutral. Credit Suisse said "its pricing strategy has limits", and UBS was worried it "lacked competitiveness in key growth markets."
The London market was somewhat subdued, and better-than-expected UK employment data gave rise to questions about the pledge by the Bank of England's Governor, Mark Carney, to keep rates on hold until 2016.
The FTSE 100 index ended up just 4.44 points at 6,588,43. Brenda Kelly, a senior market strategist at IG, said: "The FTSE 100 has failed to capitalise on Tuesday's upside momentum, as investors took back profits and numerous stocks going ex-dividend shaved some points off the UK benchmark. "
Insurer Admiral was one of these, and took the wooden spoon, down 53p to 1,227p.
Mobile giant Vodafone's £6.6bn take-over of Kabel Deutschland hung in the balance as only 20 per cent of shareholders in the German broadband and TV firm have accepted the deal ahead of last night's midnigth deadline. A huge wave of late votes was expected, but it was still far from clear if Vodafone will get 75 per cent acceptance, and it will not be official until Monday. It ticked up 2.25p to 210.15p.
Tesco sold its loss-making US business Fresh & Easy's 150 stores to US group Yucaipa at a cost of another £150m – on top of £1bn of previous writedowns. Despite the expensive departure, the City's retail experts decided it was good news for investors. Deutsche Bank said it represented a "clean break", and Shore Capital's Darren Shirley and Clive Black said "it is progressing" and, with "self-improvement in tow", the prospect of "improving free cash generation and rising returns comes closer too".
Mr Shirley admitted that "turning Tesco around was never going to be a quick or easy process" but it was now in a better position. The group has, over the past few months, quit the US and Japan, agreed a better deal for its Chinese operations, and reduced its large store developments in Europe. , Mr Shirley rated the supermarkets group a buy, as did Oriel Securities' Jonathan Pritchard, who said: "Management is now starting to get into a position where its global portfolio is in the shape that it wants it." Oriel awarded a 425p target price but Tesco was 0.65p worse off at 371.4p.
Over on the mid-tier index, gold digger African Barrick Gold's chief operating office Marco Zolezzi has left following the departure of chief executive Greg Hawkins last month. The shares improved 3.6p to 170p.
On AIM, African Minerals – the miner founded by colourful entrepreneur Frank Timis – tumbled 28.5p to 167p when it revealed it will scotch expansion plans for its mine in Sierra Leone, and has curbed output forecasts.
North Sea-focused oil group Ithaca Energy jetted up 18.25p to 144.75p after revealing better-than-expected results from first test results of four wells at its Stella field.
Drug discovery group Summit, which is focused on research for Duchenne Muscular Dystrophy and the hospital superbug C difficile revealed new positive data and was 0.75p healthier at 12p.
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