technology

ARM Pledges More Cash for Shareholders in Years Ahead

Updated on

ARM Holdings Plc, the chip designer whose products power more than 95 percent of smartphones, plans to return more cash to shareholders in the next five years as demand for its technology rises, its finance chief said.

Demand for ARM chips in smartphones and enterprise networks will propel sales, helping it boost revenue faster than rivals, Tim Score said yesterday at a conference organized by Morgan Stanley in Barcelona. ARM won’t seek to grow its cash pile, planning instead an increase in dividends and extra returns possibly through share buybacks, he said.

“We’ll be returning more cash to shareholders in the next five years than we did in the past five years,” Score said. “We’ve had buybacks in the past. We don’t intend to grow the cash from here.”

Revenue from royalties -- the fees Cambridge, England-based ARM collects when customers use its technology -- will increase at a pace of about 15 percent to 16 percent a quarter in the last three months of 2014, Score said. He said the bulk of ARM’s growth in the next three to five years will come from smartphones and enterprise networks rather than servers, where the company is pushing to rival Intel Corp.’s dominance.

“I see a lot of demand for ARM technology for next-generation handsets,” Ian Thornton, the company’s head of investor relations, said at the conference. “More consumers will be buying ARM-based devices next year than they did this year.”

ARM shares rose 1 percent to 893 pence in London trading today, paring the decline to 19 percent this year.

In the third quarter, ARM royalty revenue rose 9 percent, slowing from a 13 percent rate a year earlier.

(ARM corrected an earlier version of this story to say Score was referring to royalty growth for this year alone in fourth paragraph.)

(Updates with closing share price in sixth paragraph.)
    Before it's here, it's on the Bloomberg Terminal. LEARN MORE