Market Report: Intel's 3D chips fail to worry Arm investors

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The Independent Online

The blue-chip index may have suffered a second consecutive session of heavy losses, but Arm Holdings still managed to close near the top of the leaderboard last night as analysts said fears over advances made by its rival Intel were largely unfounded.

The Cambridge-based group was one of the biggest fallers on Wednesday after its fellow chip maker called a press conference for what it described as the "most significant technology announcement of the year". With speculation spreading that whatever was about to be revealed could spark increased competition between the two, by the time Intel unveiled its new Ivy Bridge chip technology after the bell had rung in the UK, Arm had slipped back more than 7 per cent.

Yesterday, however, it looked in much better shape, touching 582p in early trading before finishing at 567p, 9p better off. Help was at hand from a number of market voices eager to pledge their support, including Royal Bank of Scotland's Didier Scemama, who reiterated his "buy" recommendation.

The analyst described Intel's announcement as "largely benign" for Arm, saying the 3D manufacturing technology used by the US giant was "not new or exclusive" and adding that "other vendors in the industry have also been working on 3D chips, although none have declared their version ready for production".

Another boost for Arm came from Morgan Stanley, which called its fall "overdone". There was a bit more caution from Espirito Santo, with the broker predicting the news should "strengthen Intel's dominance in the PC market". But its analysts conceded that "while this announcement makes Intel more competitive in mobile space... [it] still needs to do a lot more work to seriously challenge Arm in the mobile world".

As commodities carried on heading south, the FTSE 100's woeful week continued, with its drop of 64.09 points to 5,919.98 meaning it has fallen back over 160 points in just two sessions.

Among the stocks weighing the index down was Lloyds Banking Group, which revealed a £3.5bn loss over the first three months of the year that prompted it to decline 4.64p to 53.38p. It was the signal for the rest of the sector to move into the red, as Royal Bank of Scotland and Barclays slid 1.22p to 40.48p and 7.5p to 276.3p respectively.

In a hectic day for results, Vedanta Resources was another updating the market, and it was pegged back 96p to 2,124p despite the miner announcing a jump in its core profit of over 50 per cent. The group also said it was still confident the deal to gain control of Cairn India – the Indian unit of Cairn Energy, which was 13p lower at 422.7p – would gain government approval, despite the deadline of 20 May rapidly approaching.

Investors hoping for further merger and acquisition (M&A) activity among the healthcare companies had their expectations dampened by Smith & Nephew after it said Johnson & Johnson's proposed $21bn takeover of the Swiss group Synthes was unlikely to spark further deals in the sector. The prosthetics manufacturer has frequently found itself the subject of takeover speculation, yet it still gained 20p to 680p as it posted expectation-beating revenue figures.

Bid chatter around Ferrexpo re-emerged yet again, with BHP Billiton – down 36p to 2,385.5p – becoming the latest name said by market gossips to be possibly interested in a bid for the iron ore miner. Despite the vague chitter-chatter, which mentioned a potential price of 750p a share, the group still slipped back 17.1p to 462.6p on the FTSE 250 as it revealed a drop in its pellet production of over 9 per cent last month.

Colt was another group whose takeover chances were in focus, managing a rebound of 2.1p to 144.2p after falling nearly 6 per cent in the previous two sessions. Even though it agreed with recent speculation that the telecoms group could attract an approach, Evolution Securities cut its rating to "neutral", saying its "business has been long on promise, but equally short on delivery, for many years".

The broker said the emergence of a suitor was the only way it could move above 150p, adding that "our hopes that Colt could generate enough cash to justify its current valuation, with M&A offering material upside, have been dashed".

Elsewhere, Micro Focus stayed steady at 364p despite vague talk suggesting it and Bain Capital were nearing a deal, with the US group rumoured to be about to offer between 450p and 425p a pop. Meanwhile, the mid-tier index was topped by Go-Ahead after the transport group drove up 95p to 1,495p as it claimed its full-year profit would come in ahead of expectations.

Flybe was the clear loser on the small-cap index, retreating 57.5p to 172.5p following a downbeat trading update. The budget airline, which has lost half of its share price since floating in December, warned it was seeing fewer and fewer leisure travellers – not good news for its peer, EasyJet, which retreated 5.4p to 342.9p.

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