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Why Apple might want to buy ARM

--- Last January, Apple COO Tim Cook stated, "We believe we need to own and control the primary technologies behind the products we make." That motivation, backed by Apple's 41 billion cash on hand, makes its rumored acquisition of ARM Holdings so compelling. ---

What would you do if you had $41.7 billion in cash reserves? That's what Apple has and, as Ken posted earlier, the rumor du jour suggests the company might use a modestly large chunk of it to acquire ARM Holdings. If such a deal is in the works, it would be Apple's largest purchase ever by an order of magnitude; the suggested £5.2 billion (US$8 billion) sticker price dwarfs the biggest prior buyout, which brought NeXT into Apple for $400 million and delivered the foundations for Mac OS X (along with a certain iCEO).

ARM licenses its chips to many consumer electronics heavyweights; in addition to powering the iPad and iPhone, ARM processors power other smartphones, including those running on the Symbian, Windows Mobile/Windows Phone 7, and yes, Android operating systems. An Apple acquisition of ARM, therefore, could have far-reaching implications on consumer electronics, especially when it comes to competitive access to the latest and greatest ARM chips.

In the London Evening Standard article, a trader was quoted as saying "A deal would make a lot of sense for Apple .... That way, they could stop ARM's technology from ending up in everyone else's computers and gadgets." That may be taking it a bit far -- ARM's licensing and product lineup couldn't be made completely private in the short term -- but it would make Apple the most-favored customer for ARM's designs. It would also help Apple's other recent buyout, chip shop Intrinsity, make the most of its expertise.

Back in January 2009, Apple COO Tim Cook stated, "We believe we need to own and control the primary technologies behind the products we make." As the processor plays a pivotal role in shaping the user experience on mobile devices (think performance and power consumption) an acquisition of ARM could provide Apple the ability to better integrate and leverage ARM technologies in order to stay ahead and differentiate from the competition. The A4 chip in the iPad is based on an ARM design, which was first whispered about almost two years ago.

In the last two years, Apple has made several notable acquisitions: of semiconductor company P.A. Semi, mapping company Placebase, music streaming service Lala, and mobile ad firm Quattro Wireless. So far, the Quattro Wireless acquisition has produced the most visible results, in the form of iAds. If an ARM acquisition is indeed happening, it'll be fascinating to see what comes out of it.