RISC chip designer ARM Holdings Plc is planning to ramp up R&D spending and expand the commercial areas of its business after a solid second quarter performance gave it confidence that revenue for the year will grow more than 17% and hit its target of 150m pounds ($280.4m).
However the Cambridge, UK-based company, whose processors are used in around 70% of mobile handsets, saw its shares slide 7.76% to 1.04 pounds ($1.9) amid concern over prospects for the chip sector and concern that the bulk of the company’s revenue comes in dollars.
Nonetheless, the company is on a roll. In the second quarter to June 30, net income rose 68.9% to 7.3m pounds ($13.6m) on revenue 17.6% higher at 36.9m pounds ($68.9m).
CFO Tim Score said the figures left him confident of dollar revenue growth of around 30% for the year. He said in January 20% to 25% growth was sensible.
License revenue rose 4% sequentially in the quarter to 14.6m pounds ($26.3m), continuing an upwards tend over the past five quarters. However the big growth is coming from royalties and the strength of ARM’s position is that an average charge of $0.087 per unit shipped gives little incentive for competitors to enter the market.
In the quarter, royalty revenue rose 53% to $24.9m on 286 million units and as revenue lags shipments by a quarter, this has yet to reflect the growing buoyancy of the market.
ARM sees increasing opportunities to generate revenue through software and has recently established an embedded software business, bringing together a group of software families that it has already developed.