Chip designer Arm has fallen back after stronger than expected results from rival Intel.
Arm is down more than 2% or 21p to 974.5p on concerns that Intel is gaining more ground in its key smartphone and tablet market, as the same time as Arm takes on Intel in the server market. Analysts at Liberum, long time sellers of Arm shares, said:
Intel sold 46m tablets in 2014 above its prior guidance of 40m. Intel’s share in tablets has increased from 5% in 2013 to 28% by the third quarter of 2014. Intel has displaced Arm’s licensees and is one of the factors behind Arm’s weaker than expected royalty growth this year (8% versus initial expectations of 18%).
Intel launches two major smartphone products (SoFIA 3G, LTE) in 2015 and could take share from Arm in its core market. Smartphones and tablets account for around 75% of Arm’s royalty revenue and has been the key driver of royalty growth. If intel is successful we believe estimates for Arm’s royalty re-acceleration are too high (up 8% in 2014 to 20% in 2015) and Arm is also likely to de-rate.
