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Last Wednesday, Nokia (NYSE:NOK) issued a profit warning, and its share price crashed. On Friday, little Ceva Inc. (Nasdaq:CEVA); LSE:CVA), which I own in my portfolio tracked by "Globes", and which depends on royalties it receives from companies which sell processors to Nokia, rose 6% in very heavy trading.

It is still unclear why Ceva rose, but there have been several interesting developments in its sector in recent days. First, about Nokia's warning - it has to be understood that Nokia said, along with its warning, that it will sell 10% more handsets this year than last, so Ceva's royalties will not be hurt - just the opposite, in fact.

Ceva is also no longer in the area that gave Nokia problems - smartphones, but mostly in 2G devices that are sold, and will be sold this year and in the future in giant quantities, primarily in developing markets.

An example of Nokia devices in which Ceva is found can be seen in a launch that was announced at a conference earlier this month in Nairobi, Kenya. Nokia unveiled devices whose cost to the customer, before subsidies, is only €30-40, and they are well-suited to the problems of availability of electricity in Africa. Among other features, those devices have battery time of up to 6 weeks, and they can be recharged by riding on a bicycle, with a special adapter.

Ceva, as is known, and its DSP solutions, are found in Apple's (NASDAQ:AAPL) iPads and iPhones through the communications processors made by Infineon (IFX), which are based on the intellectual property of England's ARM. Last week, it became known that Infineon has hired an investment bank to advise it on selling the division that sells to Apple and others. Among potential buyers mentioned was Intel (NASDAQ:INTC), which has found itself outside the giant cellular world since it sold its DSPC unit to Marvell Technology Group (Nasdaq: MRVL).

On the other hand, there were those who said that Intel will not buy that division of Infineon, since it depends on IP of ARM. Intel competes against ARM with its Atom processors, which Intel developed itself for mobile devices.

According to another rumor floating around recently, Apple itself will buy giant ARM, in continuation of several smaller acquisitions that it pulled off in the chip sector, which promise it control of the "brain" of its gadgets. In effect, a situation has been created in which little Ceva, with its niche in DSP solutions, can itself become an acquisition target if and when the giants decide who is buying whom.

Disclosure: Author holds shares as part of his portfolio tracked by "Globes".

Published by Globes [online], Israel business news - www.globes-online.com - on November 17, 2009; Reprinted on Seeking Alpha with permission
© Copyright of Globes Publisher Itonut (1983) Ltd. 2009

Source: Chip Giants Say Goodbuy, Ceva Says Hello