Speedy new microchip thrusts ARM higher

Market Report

ARM HOLDINGS was the toast of the market yesterday amid hopes that a swathe of high-technology giants will soon use its chips with everything.

The high-flying micro-chip designer shrugged off a tumbling market and surged more than 7 per cent amid talk that its new micro-processor is to be licensed to a number of industry giants. The stock closed 53p better at 770.5p - close to its record high - as buyers logged onto ARM's success story.

The Cambridge-based company has just developed a new faster, super-powerful microchip, which boosts computers' ability to process information.

ARM's new baby - with the catching name ARM10T - was licensed to the telecom equipment giant Lucent on Tuesday and further money-spinning deals are thought to be in the pipeline. An agreement to develop ARM's rising brand name was also thought to be in the offing.

According to the rumour mill, the US computer giant Intel, the mobile phone maker Motorola and the conglomerate Texas Utilities are queuing up to buy the rights to use the products. The mooted licensing deals would provide a major boost to ARM's earnings and some observers believe that some top-notch tie-ups could be announced at the 21 July results.

ARM was a rare light in a day of darkness. The market spent most of the day in the red, hit by fears of a US rate hike and by a lukewarm reception to the Lloyds TSB bid for Scottish Widows. However, the revelation that the latest rate cut by the Bank of England's Monetary Policy Committee had been approved by a huge majority helped to trim some of the losses.

In the end, the FTSE 100 settled 55.9 lower at 6,496.5, and the Mid Cap followed in its wake, ending 18.2 lower at 5,906.9. The Small Cap once again refused to follow the herd and moved 1.1 higher to 2,653.1.

The expected bid by Lloyds TSB for mutual insurer Scottish Widows arrived two days later than predicted. Lloyds shed 25p to 899.5p amid concerns over price and small cost savings. However, the market is expecting the high street bank to buy a former building society, such as the Woolwich, next.

Lloyds was also hurt by whispers of a counterbid from Royal Bank of Scotland. The Scottish bank fell 30p to 1,386p on fears that Widows will have to sell its 5 per cent stake.

Norwich Union was targeted as the next bid candidate and the shares jumped 15.5p to 445p. Barclays, down 30p to 1,960p, and NatWest, 20p lower to 1,470p, could respond to Lloyds' move by buying the life assurer. Other possible tie-ups included a Barclays merger with Legal & General, down 4.25p to 171.75p. Bank of Scotland, up 3p to 911p, Royal & Sun, down 12.5p to 538p, and United Assurance, up 6p to 432.5p, were also seen as targets.

Outside the excitable financials, BSkyB soared 19.5p to a 12-month peak of 621p amid growing whispers of stake-buying by French conglomerate Vivendi. The mooted sellers Granada, down 14p to 1,190p, and Pearson, 68p lower to 1,250p, denied an approach but something could move fairly soon.

Whitbread frothed 27p higher to 1,070p after claiming that its all-paper bid for the pubs owned by Allied Domecq, down 7p to 598p, is worth more than the pounds 2.7bn cash offer by Punch Taverns. After the close, Allied said it agreed with Whitbread. The latest battle left Bass, Punch's ally in the bid war, 8p lower at 932.5p. Rival Diageo rallied 11p to 706p amid bargain-hunting and vague rumours of a corporate deal.

Marks & Spencer opened the post-Greenbury era and an all-important strategy meeting with a 3.75p rise to 366.25p, while Boots moved 4p better to 762p on whispers that its managing director, Steve Russell, is to be named as the new chief executive. BG flared 4.25p better to 385.5p on persistent talk of a deal with Shell, 3p higher at 492.5p.

The South African mining giant Anglo American touched the bottom of its London life, plunging 141p to 2,790p as the bears sold out. National Power plummeted 19.5p to 477p after Morgan Stanley downgraded due to the poor outlook for the UK operations.

British Airways nosedived 5p to 447.75p after Goldman Sachs turned bearish, while British Aerospace firmed 3.75p to 412.25p. The company set the price to convert its pounds 700m bond into Orange shares at 1144p. Orange fell 22p to 862p.

Storehouse was the talk of the Mid Cap. The Mothercare group bagged a 4.5p rise to 114p in good volume amid speculation of a bid. Swiss giant Hennes and on-the-prowl Kingfisher, down 10p to 725.5p, were mentioned.

Fellow retailer Arcadia lost 8p to 222p as brokers cut forecasts after recent results.

JJB Sports flexed 17.5p higher to 296p as profit warning fears faded and vague bid rumours returned.

Jarvis rebounded 17.5p to 340p as bargain hunters moved in after Tuesday's disastrous results.

Plant hirer Ashtead climbed 4p to 187.5p on rumours that it has rejected a US bid and is now planning to buy in the States.

Trafficmaster was rammed by profit-takers and spun 34.5p lower to 419p. Paper group David Smith, results next week, lost 9.5p to 148p as Warburg downgraded. The broker's caution also pushed rival Arjo Wiggins 11p lower to 219p.

AIM minnow Carisbrooke Shipping soared 19p to 48.5p after receiving a 50p-per-share management buyout.

Electronic group Advanced Power Components buzzed 17p higher to 63.5p on whispers of an IBM deal. Scottish Highland Hotels booked a 28.5p to 114.5p after unveiling a bid approach.

Ladies clothes maker Shani lost 8.5p to 40p, while poor results sent farming businesses John Swan 50p lower to 275p.

SEAQ VOLUME: 1.25BN

SEAQ TRADES: 73,287

GILTS INDEX: 106.44 -0.29

THE PROPERTY group Birkby could soon be receiving a bid. The shares yesterday touched a 12-month high of 246.5p after a 5.5p rise on rumours that a rival is having a close look.

Birkby, which specialises in leasing out commercial and industrial space, is believed to have rejected a bid of 285p-per-share a few months back. Insiders think that any new offer will have to be around 300p, valuing the group at some pounds 144m.

THE CONSULTANCY tiddler Beaufort rose 0.25p to 3.25p after posting bumper results. The AIM-listed company reported an eight-fold increase in pre-tax profit to pounds 550,000.

The rise was partly due to some add-on acquisitions. Beaufort, whose services range from economic consultancies to training advice, is looking for more buys in the UK.

The company is believed to be in very early talks with an AIM rival.