Chip designer ARM, which has agreed to be bought by Japan’s SoftBank for £24bn, has unveiled a slightly disappointing results for the second quarter.
The company, which supplies technology for iPhones as well as other connected equipment such as televisions and washing machines, said pretax profits rose 5% year on year to £130m on revenues up 17% at £267.6m. It said licensing revenues were up 14% year on year, and royalty revenues 11% better. Chief executive Simon Segars said:
Our royalty revenue growth continues to outperform the wider semiconductor industry, driven by market share gain and the increasing adoption of ARM’s latest technologies...We expect this outperformance to continue.
ARM is continuing to invest in products that will support our partners’ roadmaps as they develop next-generation technologies such as 5G networks, autonomous vehicles and the Internet of Things.
Analysts at Credit Suisse said:
The second quarter results [are] slightly below expectations. ARM reported second quarter sales of $388m (-3% quarter on quarter/+9% year on year) or £268m (foreign exchange rate of $1.45) versus Credit Suisse/consensus at $392m (£274m, foreign exchange rate of $1.43)... Normalised cash generation in the second quarter was £128m driving net cash to £805m (or 57p per share); note this is down quarter on quarter due to £230m of cash paid out for acquisitions, £79m for dividends and £18m for buybacks.
ARM has not provided its usual full year guidance given the recent acquisition announcement by SoftBank.
Given SoftBank had announced an agreement to acquire ARM in an all-cash deal for 1,700p a share (on 18th July), we maintain our neutral rating and target price of 1,700p.
ARM shares are currently down 1p at £16.75.
