ARM Sales Soar Ahead of $32 Billion Softbank Takeover

  • Softbank acquisition target misses consensus sales estimates
  • Reports strong growth in IoT market as smartphones fade

Arm Holdings Plc, the U.K. semiconductor design company that SoftBank Group Corp. is acquiring, said second-quarter sales gained 15 percent on more shipments of chips it designs for use in smartphones and tablets.

Key Points

  • The Cambridge, England-based company said revenue was 267.6 million pounds ($387.6 million) versus 228.5 million pounds a year ago. The figure missed the 276.3 million-pound consensus of analysts in a survey.
  • Second-quarter revenue rose 9 percent year-on-year in U.S. dollar terms.
  • Adjusted earnings per share were 8.6 pence, which exceeded a forecast of 8.2 pence, according to data compiled by Bloomberg.
  • ARM said it would raise its interim dividend by 20 percent

The Big Picture

SoftBank Chief Executive Officer Masayoshi Son said he was buying ARM for 24 billion pounds last week largely because of its potential in the Internet of Things (IoT), a term encompassing the idea of connecting machines -- from dishwashers to shipping containers to power turbines -- to the internet. Some 30 percent of processors, and controller chips in the so-called embedded intelligence market, which includes IoT applications, are based on ARM designs.

ARM said the IoT-type processors made up 42 percent of the 3.6 billion ARM-designed semiconductors shipped in the second quarter. ARM Chief Executive Officer Simon Segars, on a conference call, said 60 percent of those chips are being shipped for non-mobile applications.

Even so, much of ARM’s revenue remains dependent on licenses and royalty payments related to smartphones, where the company has a more than 85 percent market share. Though growth in smartphone sales has been slowing, ARM is countering this by pushing its 64-bit chip architecture, powerful processor designs used in the latest generation of smartphones, such as Apple’s iPhone and Samsung’s Galaxy line, for which ARM can charge higher royalty rates.

The company said that about 65 percent of all smartphones now being shipped contain at least one of its Cortex-A processors, up from about 30 percent the year before.

The Detail

  • The company signed 25 new licensing agreements for its processors in the quarter, with 5 of these being for its higher-end, Cortex-A chip designs. 
  • Total shipments of ARM-based chips were 3.6 billion in the quarter, up 9 percent from the same period last year.
  • Given the proposed SoftBank acquisition of ARM, the company said it was not appropriate to provide any forward guidance for the rest of the year.
    But Segars said in a statement that "royalty revenue growth continues to outperform the wider semiconductor industry, driven by market share gains and increasing adoption of ARM’s latest technology." He also said "we expect this outperformance will continue."
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