Two and a half months ago, I labeled semiconductor intellectual-property firm ARM Holdings (NASDAQ:ARMHY) -- twice selected as a Motley Fool Stock Advisor recommendation -- the Rodney Dangerfield of chip companies. Yesterday proved my point, when the company announced a new next-generation processor, the Cortex-A8. Investors yawned, and the stock moved down three cents. Talk about a lack of respect!

The Cortex A-8 is an exciting product. It offers cell phone handset manufacturers more than four times the performance for applications such as mobile entertainment, communications, and gaming, yet it uses less than 300 milliwatts of power in the 65 nanometer format. In simpler terms, the chip offers more than four times the performance at roughly the same power consumption of today's devices.

Samsung, a licensee of the new processor, sees high-end mobile phones maintaining their sleek designs while offering MP3 players, video editing, and Java-based applications as a result of the new processor. ARM puts it this way: "For the first time, low-cost, high-volume products will have access to desktop levels of performance using the Cortex-A8 processor." What a concept -- desktop computer performance resting in a slim cell phone handset.

Other first licensees include Texas Instruments (NYSE:TXN), Matsushita Electric (NYSE:MC), and Freescale Semiconductors (NYSE:FSL).

The risk at technology companies like ARM is that rapid-fire cycles of product innovation can change a company's fortune overnight. In this case, ARM is clearly leading the charge and has the big-name licensees to back up that claim. A Microsoft (NASDAQ:MSFT) product manager saw it this way: "The ARM Cortex-A8 processor will be a key ingredient for developers to tap into the lucrative market of mobile information workers that demand PC-like performance."

The company's balance sheet shows no debt and $271.2 million in cash. That is rock solid. And in an arena where continuous innovation and the possibility of missed product cycles (rendering returns on investments accordingly lower) is effectively the norm, ARM seems as though it's doing well.

The risk still remains, though, that ARM might drop the ball in the future and fail to lead with innovation. But there is the cash to fuel the recovery (or attempts at a recovery) if the company should find itself sucking wind and trying to play catch-up. The stock is currently trading for 29.3 times this year's estimated earnings, and analysts expect the company to grow earnings 22.5% annually for the next five years. That's a reasonable price for such rapid growth. With the A8's coming of age and its future looking bright according to the initial licensee list, 2006 could be a year in which the earnings surprises are on the upside.

Are you looking for great companies? Let Motley Fool co-founders David and Tom Gardner find the next big winner for you. Subscribe to the Motley Fool Stock Advisor newsletter and find other opportunities like ARM Holdings.

Fool contributor W.D. Crotty does not own shares in any of the companies mentioned. Click here to see The Motley Fool's disclosure policy.