LONDON—ARM Holdings PLC, a computer-chip designer that creates
technology found in iPhones, increased its dividend on Wednesday
after reporting a rise in second-quarter profit, boosted by a jump
in chip shipments.
The company, based in Cambridge, England, said that net profit
in the three months ended June 30 rose to £ 77.1 million ($120
million) from £ 55.5 million in the same period a year earlier.
Revenue rose 22% year-on-year to £ 229 million, marginally lower
than a consensus market forecast of £ 235 million.
However, in dollar terms, the group said that 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 that 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 chips found in 95% of all smartphones, including
those manufactured by Apple Inc. and Samsung Electronics Co. It
earns licensing fees from chip manufacturers such as Qualcomm Inc.
and Nvidia Corp. and royalties on every chip shipped. The company's
revenue often lags behind 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 that the number of chips shipped in the second quarter rose
26% year-on-year to 3.4 billion.
On 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 said on Wednesday that it was unconcerned about Apple's
results, adding that its forecasts for the remainder of the year
were 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 £ 14.6 billion. Analysts said that 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 was 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.
Write to Simon Zekaria at simon.zekaria@wsj.com
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