ARM bitten by Apple's bitter results

Britain's tech giant is bullish, but it can't escape the fortunes of one of its biggest customers.

by Rachel Savage
Last Updated: 06 Aug 2015

Companies can try their hardest to make great products and services and run a tight ship, yet still be buffeted by forces outside their control – just ask anyone in oil. And so it goes for ARM, which is taking a hit from the disappointing results of one of its biggest customers: Apple.

The Cambridge-based chip designer unveiled a pretty confident set of half-year results: revenue up 22% to £456m, pre-tax profit 28% higher at £244m, and a record 54 processor licences signed in the second quarter of 2015.

The FTSE 100 company, Britain’s only real global tech success, cheered ‘a robust pipeline’ of new licences and pricier chips meaning royalty revenues are growing faster than the industries that use them. It duly plumped up its interim dividend 25%.

But even that sweetener that was not enough to save ARM from the fallout from Apple’s disappointing results. Its shares were down 3.75% to 1,000p around midday, having risen a modest 5% overall this year.

Of course, day-to-day share price movements shouldn’t worry sensible business bosses too much – after all they don’t bother Warren Buffet. But Apple is especially important: analysts estimated it accounted for as much as a quarter of ARM’s royalty revenue last year. ARM, whose chip designs can be found in 95% of smartphones, will need to convince investors that it is making headway diversifying.

It boasted today its chips are now found in everything ‘from biometric sensors for mobile payments to automotive engine control,’ and it is investing heavily in new technology for areas like servers and the so-called ‘internet of things’. But, still, none of those would pay out quite as quickly, and as much, as a nice juicy sales boost courtesy of the world’s most valuable company.

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