CAMBRIDGE, U.K ( TheStreet) -- ARM Holdings ( ARMH), which reports its first-quarter results before market open on Wednesday, is set to maintain its status as the pacesetter for the semiconductor market. Analysts, though, are warning investors to approach with caution. One of the leaders of the 2011 tech sector uptick, ARM's low-power chip technology has placed the company in the sweet spot of the smartphone and tablet boom. The British outfit has already amassed a host of big-name partners, which include Microsoft ( MSFT), IBM ( IBM), Nvidia ( NVDA) and LG Electronics.
"The appeal of the ARM story is hard to deny; ubiquitous architecture, ramping handset complexity and new market penetration," explained Lee Simpson, an equity analyst at Jefferies, in a recent note. 'With the semis sector marked to grow mid single digits this year, we concur that ARM does look well positioned to outgrow the market." Buoyed by this momentum, ARM's shares have climbed more than 161% over the last 12 months, compared to dips of 13% and 7%, respectively, at Intel ( INTC) and AMD ( AMD). Simpson, however, thinks that investors should still approach ARM with caution, warning that the company's success is largely priced into its shares. "We continue to view ARM's shares as over-valued," added Peter Knox, an analyst at Societe Generale, in a note. "Expectations for tablets and mobile computing look overdone to us." ARM is also facing stiffer competition as other companies ramp up their mobile efforts. Intel, which is the world's largest chipmaker, recently launched its own tablet processor, code-named Oak Trail, and CEO Paul Otellini has vowed to offer tablet technology for the Windows, Android and MeeGo operating systems by the end of the year. Intel is something of a laggard in the smartphone and tablet markets, although this did not stop the chip giant from posting stellar first-quarter results earlier this month. The robust spending environment noted by Intel, however, could actually bode well for ARM.
|British chipmaker ARM reports its first-quarter results on Wednesday before market open.|