The Reason ARM Holdings Plc (ARMH) Is Dominating Intel Corporation (INTC)

If you can’t beat ‘em…

In my opinion, it’s not too late for Intel to save itself. With a new CEO on the way to replace Otellini in May, it’s high time for the company to entertain some new ideas.

First on the agenda should be a return to licensing ARM technology. This would provide Intel with immediate growth opportunities, and give it a viable alternative platform if it needs to phase out its x86 chips. In other words, it would get two baskets for its eggs.

Licensing ARM chips again could also rekindle its broken partnership with Apple. Apple is currently looking for a new partner to manufacture its ARM chips, which are ironically made by its arch nemesis Samsung. Taiwan-based foundry TSMC has emerged as the top contender, but Intel could also have a shot at becoming Apple’s new manufacturer – if it offers an ARM-based alternative, that is.

If Intel holds off on joining its rival any longer, other smaller ARM customers such as Nvidia, Broadcom, Marvell, Freescale and AMD, could evolve into dangerous competitors and chip away further at Intel’s once dominant market share.

A matter of pride

Intel hasn’t given up on its dreams to take down ARM with an effective version of the Atom. The company recently unveiled its newest low-power 32nm Atom processor, the ’Centerton S1200’ series, a 64-bit lower-powered CPU that is expected to compete with ARM’s 64-bit Cortex A9 chips.

Both chips are aimed at the enterprise market, where demand for power-efficient server processors is rising. Giant data centers, such as those operated by Amazon or Google, consume so much electricity that effective low-power devices are an absolute necessity for preserving a company’s bottom line.

That might be progress in the server market, but a mobile answer to ARM’s dominance remains frustratingly elusive.

The Foolish bottom line

ARM Holdings ($785 million in 2011 revenues) is a veritable David compared to Intel’s Goliath ($54 billion in 2011 revenues), but David just needed a well placed rock between the eyes to take Goliath down.

In this case, however, ARM has given slingshots and rocks to a dozen of its friends, who are all ready to take their best shot at taking out the giant. I think it’s time for Intel to play nice with the little guys.

Krisztian Flautner, the head of ARM’s R&D department, acknowledged that Intel would have a tough time staying ahead if it stays with Otellini’s business model. “They (Intel) emphasizethe core technology and try to push the lock-in business model,” Flautner stated. “We are the David of the situation, with Intel as Goliath. That is how disruption happens.”

The article The Reason ARM Holdings Is Dominating Intel originally appeared on Fool.com.

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