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ARM Adds $1 Billion on Apple IPhone Royalty Boost: London Mover

Sept. 11 (Bloomberg) -- ARM Holdings Plc, the chip designer whose products power Apple Inc.’s new iPhones, gained the most in almost five months on predictions it will generate increased royalties from the use of its latest technology.

The shares advanced 4.8 percent to 986.5 pence, the biggest gain since April and the highest price since May 31. The stock rose the most among companies in the FTSE 100 Index, adding 637 million pounds ($1 billion) to ARM’s market capitalization.

The iPhone 5S will use ARM’s latest 64-bit technology, Apple said yesterday. The new processor carries a higher royalty rate and a higher chip value than current 32-bit technology, Andrew Dunn, an analyst at RBC Capital Markets, said in a note.

“The iPhone 5S will represent a greater royalty opportunity for ARM,” Dunn said. “Should this mark the beginning of 64-bit in smartphones, this should help underpin ARM’s upward trajectory in overall royalty rate following a decade of declines.”

The adoption of the new chip as well as ARM technology in Apple’s new motion coprocessor chip will add as much as 10 U.S. cents in royalties for each iPhone 5S compared with the iPhone 5, taking the total to 50 cents to 60 cents per device, UBS analyst Gareth Jenkins said in a note today.

“We see Apple’s earlier-than-expected adoption as a strong positive for the ARM investment case,” Deutsche Bank AG analyst Johannes Schaller said in a note.

Imagination, Gemalto

Among other suppliers, Imagination Technologies Group Plc rose 1.3 percent in London, while Gemalto NV fell 6.4 percent in Amsterdam after analysts said Cupertino, California-based Apple hasn’t yet incorporated its NFC chip technology.

Apple unveiled two new models yesterday. The high-end iPhone 5S with fingerprint-security features, a speedier processor and better camera will cost $199 to $399 and be available in three colors. The iPhone 5C will cost $99 to $199 with a wireless contract and comes in five different colors.

The 64-bit chip in the iPhone 5S will make the device work twice as fast as the iPhone 5, according to Apple. The new phones will be available in stores on Sept. 20.

To contact the reporter on this story: Peter Woodifield in Edinburgh at pwoodifield@bloomberg.net

To contact the editor responsible for this story: Douglas Lytle at dlytle@bloomberg.net

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