Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



The Men Who Run ARM Holdings

LONDON -- Management can make all the difference to a company's success and thus its share price.

The best companies are those run by talented and experienced leaders with strong vested interests in the success of the business, held in check by a board with sound financial and business acumen. Some of the worst investments to hold are those run by executives collecting fat rewards as the underlying business goes to pot.

In this series, I'm assessing the boardrooms of companies within the FTSE 100. I hope to separate the management teams that are worth following from those that are not. Today I am looking at ARM Holdings  (LSE: ARM  ) (NASDAQ: ARMH  ) , whose chips are in 95% of the world's smartphones.

Here are the key directors:



Sir John Buchanan

(non exec) Chairman

Warren East

Chief executive until 01/07/13

Simon Segars

President and CEO from 02/07/13

Mike Muller

Chief technology officer

Tim Score

Chief financial officer

Buchanan has been in the chair just over 12 months. He spent 33 years with BP, becoming chief financial officer for six years before retiring in 2003. His previous non-executive directorships include the chairmanship of Smith and Nephew, senior independent director of Vodafone, and AstraZeneca.

An engineer, East joined ARM from Texas Instruments in 1994 to set up its consultancy division, and rose through the ranks becoming chief operating officer in 2000 and CEO in 2001. Since then, turnover has quadrupled and operating profits have risen five-fold.

The shares have quadrupled, after seriously dipping in his first year. East was responsible for taking ARM into low-powered chips when industry leader Intel wasn't interested, leading to the company's current dominant position.

East surprised investors by announcing his retirement, to be replaced by Simon Segars. The logic is that with product development lasting five to seven years, staying now would mean a 20-year stint to see through the next generation of products. But some might think it's good timing to depart on a high.

Segars joined ARM in 1991 shortly after its formation, and worked on the design of ARM's early chips. He has worked in a number of areas, concentrating on technological roles, and presently runs the IP division. The two men have worked closely together and analysts do not expect any change of direction.

Muller predates both: he was a founder of ARM, working for its predecessor company Acorn. He undertook marketing roles before being appointed chief technology officer, joining the board in 2001. Another founder, Tudor Brown, stepped down from the board last year.

Score is the outsider, joining as CFO in 2002. A chartered accountant, he undertook finance roles in a number of companies and was finance director of mid-caps William Baird and Rebus.

Unsurprisingly, ARM's five non-execs have predominantly technological backgrounds, which they probably need to effectively interrogate the close-knit management.

I analyze management teams from five different angles to help work out a verdict. Here's my assessment:

1. Reputation. Management CVs and track record.


Score 4/5

2. Performance. Success at the company.


Score 5/5

3. Board Composition. Skills, experience, balance


Score 3/5

4. Remuneration. Fairness of pay, link to performance.


Score 3/5

5. Directors' Holdings, compared to their pay.

Four execs have £40m-worth of shares between them.

Score 5/5

Overall, ARM scores 20 out of 25, a high result. This is a technology-heavy board that has delivered by out-thinking the competition, which no doubt involved luck as well as judgment. Shareholders might have slight concerns that the old guard are starting to leave.

I've collated all my FTSE 100 boardroom verdicts on this summary page.

Buffett's favorite FTSE share
Legendary investor Warren Buffett has always looked for impressive management teams when picking stocks. His latest acquisition, Heinz, has long had a reputation for strong management. Indeed, Buffett praised its "excellent management" alongside its high-quality products and continuous innovation.

So I think it's important to tell you about the FTSE 100 company in which the billionaire stock-picker has a substantial stake. A special free report from The Motley Fool -- "The One U.K. Share Warren Buffett Loves" -- explains Buffett's purchase and investing logic in full.

And Buffett, don't forget, rarely invests outside his native United States, which to my mind makes this British blue chip -- and its management -- all the more attractive. So why not download the report today? It's totally free and comes with no further obligation.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2452522, ~/Articles/ArticleHandler.aspx, 10/23/2016 8:24:38 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 1 day ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

12/31/1969 7:00 PM
ARM $0.00 Down +0.00 +0.00%
ARM Holdings CAPS Rating: No stars
ARMH $0.00 Down +0.00 +0.00%
ARM Holdings CAPS Rating: ***
AZN $30.72 Down -0.28 -0.90%
AstraZeneca CAPS Rating: ****
BP $36.25 Up +0.20 +0.55%
BP CAPS Rating: ****
INTC $35.15 Down -0.28 -0.79%
Intel CAPS Rating: ****
SNN $30.40 Down -0.31 -1.01%
Smith and Nephew CAPS Rating: ****
VOD $222.97 Down -0.53 -0.24%
Vodafone CAPS Rating: No stars