Microsoft penned a licencing deal with chip designer ARM Holdings that will allow the software-maker to design chips based on ARM technology.

ARM is considered to be one of the most prolific chip-designers, and ARM chips are used in everything ranging from Apple’s iPhones to iPads, and now Microsoft will be able to design its own applications processor for gaming consoles as well as smartphones.

The deal provided a boost to hopes that future versions of Windows will run on Arm-powered hardware. In that case, the development will prove to be a game changer for ARM as the chip-designer will get an access to the
400m-plus unit PC and laptop markets.

The announcement of the deal pushed shares in ARM Holdings up by the most in around past two years in London trading.

In the after-hours trading, shares at one point reached as high as 354.78 pence. Shares closed 353.2 pence-a-share at a gain of 11.6 per cent or 36.8 pence. The index closed 1.19 points off at 5,312.62 points, but the figure was around 3 per cent up on the week.

The announcement lacked details of the deal, but RBS nevertheless hiked its target price 73 per cent from 242 pence to 420 pence.