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Cambridge chip designer, ARM Holdings (LSE:ARM) shares reached a record high of 1,233 today on the London Exchange following a first quarter earnings report that handily beat expectations.
ARM shares closed on Monday at 1,150 and opened this morning at 1,218, a 5.9% increase in early trading. The share price reached its all-time high shortly after 10:00 am, before closing at 1,195, up 3.9% for the day, but missing the 1,202 closing mark set on 19 March.
The nearly insane global demand for Apple iPhone 6, which is powered by ARM technology, has helped to boost the company’s revenues by 14% to £227.5 million. The mix of license fees and royalties drove its pretax profits up 24% to £120.5 million. This is the beginning of the (re)mix that ARM has promised to for some time as the demand transitions from initial fees to ongoing royalties. As a result of the company’s performance, EPS posted a 27% increase from 5.6 pence to 7.1 pence.
CEO Simon Segars expects the favorable mix to not only continue, but to continue stronger than ever. He noted that, “As the world becomes more digital and more connected, we continue to see an increase in the demand for ARM’s smart and energy-efficient technology, which is driving both our licensing and royalty revenues.”
What should not be overlooked in that statement is that both licensing and royalty revenues should continue to increase with increased demand.
Segars went on to share that, “In recent months many handset OEMs have announced smartphones and tablets based on ARMv8-A and Mali graphics processors. As production of these mobile computers start to ramp up in the second half of the year, ARM will benefit from the higher royalty percentage per chip that these technologies deliver compared to the processors in previous generations of mobile devices.”
Companies that have selected the ARMv8-A technology for mobile devices include Acer, Alcatel, HTC, Huawei, Lenovo, LG, Motorola, Samsung, Sony, and ZTE. Overall shipments of chips based on ARM designed is on target to exceed 600 million or even go as high as 700 million.
The strategic basis for ARM’s business has positioned it success year-after-year in an otherwise highly competitive market, by developing and licensing its IP to manufacturers of mobile technology that, just as it has during this entire century, demands robust, longer-lasting power sources as the world moves toward the domination of the Internet of Things.
