(Rewrites, adds detail.)
By Simon Zekaria
LONDON--ARM Holdings PLC (ARM.LN), a computer-chip designer that
creates technology found in Apple Inc. (AAPL) iPhones, Wednesday
increased its dividend after reporting a rise in second-quarter
profit, boosted by a jump in chip shipments.
The Cambridge, U.K.-based company said net profit in the three
months to June 30 rose to 77.1 million pounds ($120 million) from
GBP55.5 million in the same period a year earlier.
Revenue rose 22% year-on-year to GBP229 million, marginally
lower than a consensus market forecast of GBP235 million.
However, in dollar terms, the group said it expects full-year
revenue to be in line with market predictions of about $1.48
billion, assuming macroeconomic uncertainty doesn't have any
further impact on consumer spending.
The company said it recommends raising its interim dividend 25%
to 3.15 pence a share.
"[The second quarter] has been a strong quarter for ARM," said
Chief Executive Simon Segars.
ARM designs the chips found in 95% of all smartphones, including
those manufactured by behemoths Apple Inc. and Samsung Electronics
Co. (SSNHZ). It earns licensing fees from chip manufacturers such
as Qualcomm Inc. (QCOM) and Nvidia Corp. (NVDA) and royalties on
every chip shipped. The company's revenue often lags the market,
because nearly half of its business comes from royalties.
In dollar terms, ARM's licensing revenue in the second quarter
rose 3% year-on-year, while revenue from royalties grew 30%. ARM
said the number of chips shipped in the second quarter rose 26%
year-on-year to 3.4 billion.
Tuesday, Apple's profit surged 38%, aided by strong demand for
the company's latest iPhones and robust growth in China where sales
more than doubled. But while Apple sold 35% more iPhones in the
fiscal third quarter compared with a year earlier, those sales
missed some analysts' estimates. Apple also indicated its revenue
in the current quarter could come in below market projections.
ARM Wednesday said it is unconcerned about Apple's results,
adding its forecasts for the remainder of the year are unchanged
with strong royalty momentum and good visibility on a pipeline of
licensing orders.
At 0831 GMT, ARM shares dipped 3.7% to 1,001 pence, valuing the
company at GBP14.6 billion. Analysts said a stronger-than-expected
foreign exchange rate had an impact on the company's results and
that investor sentiment is dented by Apple's earnings
statement.
"Apple's results disappointed markets overnight," said Accendo
Markets analyst Augustin Eden, adding that ARM's stock fall is a
buying opportunity.
ARM's business model is challenged by softening global demand
for higher-end smartphones. Earlier this month, Samsung warned of
sliding quarterly operating profit and revenue as it grapples with
the fast-changing mobile industry.
To reduce its reliance on smartphones, ARM is emphasizing
commercial opportunities in the so-called Internet of Things, or
the plethora of connected devices that track activity and data,
such as cars, lamps and health-monitoring wristbands. It is also
positioning itself to take a share of the lucrative computer server
market from Intel Corp. (INTC).
Write to Simon Zekaria at simon.zekaria@wsj.com