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ARM Holdings Sales Climb as Chip Designs Feature in New IPhone

ARM Holdings Plc (ARM) third-quarter revenue rose 27 percent on sales of its products that are used in Apple Inc. (AAPL)’s iPhone.

Revenue at the chip designer climbed to 184 million pounds, or $286.7 million as reported in dollars, the Cambridge, England-based company said. Analysts predicted 179.9 million pounds, according to the average of estimates compiled by Bloomberg. Royalty revenue rose 13 percent to $137.1 million.

ARM has had five consecutive years of revenue growth as its designs for chips that control graphics and processing were used in increasingly popular smartphones and tablets. New Chief Executive Officer Simon Segars, who succeeded Warren East in July, is confronting a shift in the industry’s growth to low-end smartphones and stiffer competition from Intel Corp., which has begun designing its own chips for mobile.

While “third-quarter revenue is well ahead from very strong licensing,” the “royalty revenue is short of expectations with growth rate slowing substantially,” Nick James, an analyst at Numis Securities Ltd., said in a note. James reiterated a reduce recommendation on the shares.

ARM shares were up 0.5 percent at 1,044 pence as of 12:59 p.m., after falling as much as 7.5 percent earlier in the day.

Photographer: Chris Ratcliffe/Bloomberg

ARM Holdings Plc Chief Executive Officer Simon Segars said in the statement, “As the products we use every day become more connected, and as new categories of smart devices are introduced, there are increasing opportunities for ARM’s high-performance, low-power technology, which drive both license and long-term royalty revenues,” Close

ARM Holdings Plc Chief Executive Officer Simon Segars said in the statement, “As the... Read More

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Photographer: Chris Ratcliffe/Bloomberg

ARM Holdings Plc Chief Executive Officer Simon Segars said in the statement, “As the products we use every day become more connected, and as new categories of smart devices are introduced, there are increasing opportunities for ARM’s high-performance, low-power technology, which drive both license and long-term royalty revenues,”

The company predicted about $290 million in fourth-quarter revenue “assuming the macroeconomic situation does not deteriorate significantly.”

Tablets, TVs

ARM’s shares have risen more than 10 percent since Sept. 10, when Cupertino, California-based Apple said it would use the company’s new 64-bit technology in its new iPhone 5S. The announcement should drive widespread adoption of processors based on the designs, Bank of America-Merrill Lynch analysts said in a note. Chipmaker Broadcom Corp. (BRCM) said it would create a new 64-bit chip based on ARM’s technology for enterprise networking applications, ARM said today.

Segars is focused on increasing market share for semiconductor designs for connected appliances and Web-enabled “smart” televisions, as well as smartphones and tablets. The “Internet of things” can include connected appliances such as thermostats that can be controlled remotely and with mobile phones.

The embedded-processing business grew 25 percent last year and ARM got more than half of its sales from products other than mobile phones for the first time in the third quarter of 2012.

To contact the reporter on this story: Amy Thomson in London at athomson6@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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