LONDON -- ARM (ISE: ARM.L) (NAS: ARMH) jumped 32 pence to 727 pence, while Imagination Technologies (ISE: IMG.L) added 5 pence to 470 pence, after the two companies announced a deal this morning to acquire MIPS Technologies (NAS: MIPS) .
In a complex deal, ARM is set to pay $168 million and lead a consortium to purchase 498 patent and patent applications owned by MIPS. Other companies in the consortium are affiliated to the Allied Security Trust, whose members include Hewlett-Packard, IBM, and Intel and which will contribute $182 million toward the acquisition.
In a separate transaction, Imagination is to pay $60 million to acquire the operating business of MIPS, as well as 82 of the group's patents. Imagination will also receive a perpetual, royalty-free license to use the patents acquired by the ARM consortium.
MIPS pioneered the modern 32-bit and 64-bit RISC CPU architecture. A share price that has essentially trod water for 10 years prompted speculation that a "patent troll" could acquire the business and embark on litigation claims against competitors.
Warren East, chief executive of ARM, admitted today:
ARM is a leading participant in this consortium which presents an opportunity for companies to neutralise any potential infringement risk from these patents in the further development of advanced embedded technology. Litigation is expensive and time-consuming and, in this case, a collective approach with other major industry players was the best way to remove that risk.
Meanwhile, Imagination CEO Hossein Yassaie said: "MIPS is the company that pioneered the RISC CPU architecture and created an iconic and widely respected technology. ... I believe that the combination of our existing Meta CPU technologies and activities with MIPS's capabilities will help us to create a new force to be reckoned with in the CPU IP market."
Today's news and positive investor reaction have extended the wonderful long-term gains delivered by the shares of ARM and Imagination.
About four years ago, ARM shares languished at 79 pence, while those of Imagination had fallen to 32 pence. Since then, the price of ARM has surged more than eightfold, while the price of Imagination has rocketed an amazing 13-fold. Certainly the microchip industry can be home to enormously wealth-changing investments.
If you are keen to earn such generous profits from high-growth industries, this free Motley Fool report -- "10 Steps To Making A Million In The Market" -- could help you on your way. The report explains how tracking down leading companies in dynamic sectors can be a vital step on the path to the magic 1 million pound milestone. You never know -- the next ARM or Imagination could be out there right now, ready to transform your wealth.
Are you looking to profit as a long-term investor? "10 Steps To Making A Million In The Market" is the latest Motley Fool guide to help Britain invest. Better. We urge you to read the report today -- while it's still free and available.
Further Motley Fool investment opportunities:
The article ARM and Imagination Technologies Buy MIPS Technologies originally appeared on Fool.com.Maynard does not own any share mentioned in this article. The Motley Fool owns shares of International Business Machines, Imagination Technologies Group, and Intel. Motley Fool newsletter services have recommended buying shares of Intel. Motley Fool newsletter services have recommended creating a synthetic long position in International Business Machines. Motley Fool newsletter services have recommended writing puts on Intel. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.