Why ARM Holdings Is Poised to Underperform

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, microprocessor designer ARM Holdings (NASDAQ: ARMH  ) has received a distressing two-star ranking.

With that in mind, let's take a closer look at ARM and see what CAPS investors are saying about the stock right now.

ARM facts

Headquarters (Founded)

Cambridge, England (1990)

Market Cap

$17.1 billion

Industry

Semiconductors

Trailing-12-Month Revenue

$884.9 million

Management

CEO D. Warren East (since 2001)

Return on Equity (Average, Past 3 Years)

11.6%

Cash/Debt

$710.9 million / $165.6 million

Dividend Yield

0.4%

Competitors

Intel (NASDAQ: INTC  )
MIPS Technologies
(UNKNOWN: MIPS.DL  )
Rambus
(NASDAQ: RMBS  )

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 9% of the 892 members who have rated ARM believe the stock will underperform the S&P 500 going forward.

Earlier this year, one of those Fools, bradyamanaka, succinctly summed up the ARM bear case for our community:

Intel is moving into the smartphone/tablet arena. These guys haven't been first to either the computer or the server market, but when they get there, they win. The same thing is going to happen in the smartphone/tablet arena. Intel spends more on R+D than [ARM] grosses in revenue in a year. ... They consequently have much better process management than any of the foundries and this is going to make a large impact in the smartphone/tablet market ... next year. This impact will be larger than any impact that [ARM] may have on servers/PC market.

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