The Arm Ltd logo and an American flag are seen in this illustration taken March 6, 2023. REUTERS/Dado Ruvic/Illustration/File Photo
SoftBank Group Corp’s Arm Holdings Ltd reported a 1% drop in annual revenue due to a slowdown in smartphone sales, after the chip designer leaked documents for a first public (IPO) which should be the most important of the year.
ArmThe IPO launch is expected to revive a lackluster IPO market, which over the past year has seen several high-profile startups postpone their IPO plans due to market volatility. The British company has weathered the chip industry downturn better than most and is moving into still-booming segments like cloud computing.
For the year ended March 31, ArmSales of slumped to $2.68 billion, mostly impacted by a slump in global smartphone shipments. Sales for the quarter ended June 30 fell 2.5% to $675 million.
Arm said more than 50% of its most recent fiscal year royalty revenue came from smartphones and consumer electronics. According to Counterpoint Research, the global smartphone market is on track to hit a decade low this year. ArmThe modest decline in revenue, despite a heavy reliance on smartphones for royalties, suggests that its per-chip prices have risen.
The company, whose chip technology powers most smartphones, including iPhones, did not disclose how many shares it plans to sell and the valuation it will seek. Reuters previously reported that SoftBank plans to sell about 10% of Armin the IPO and are targeting a valuation of between $60 billion and $70 billion for the chip designer.
Arm previously planned to raise between $8 billion and $10 billion through the IPO, but is now expected to raise less capital, after SoftBank bought the 25% stake in Arm he did not directly own his Saudi-backed Vision fund, Reuters first reported in August. SoftBank confirmed the deal with the Vision Fund in its Monday filing.
Second crack at the IPO
Founded in 1990, Arm was started as a joint venture between Acorn Computers, Apple Inc (when it was known as Apple Computer) and VLSI Technology. The company was publiclisted on the London Stock Exchange and Nasdaq from 1998 until 2016, when SoftBank took Arm private for 32 billion dollars.
SoftBank has begun preparations for an IPO of Arm after a deal to sell the company to Nvidia Corp for $40 billion fell apart last year over objections from US and European antitrust regulators.
Arm earns money from the initial license fee for the technology, then a royalty paid on each chip sold by Armcustomers. The company has increased that royalty revenue, saying the latest version of its technology has the “potential to further increase our per-device royalty opportunity,” according to its filing.
ArmChip designs dominate the smartphone industry, but they’re also used in Apple-made laptops and some Windows machines.
ArmThe technology also gained 10% market share in cloud computing, where ArmChip-based chips are used in networking as well as central processors in servers.
The only place where Arm has yet to make major inroads into the artificial intelligence (AI) market, where Nvidia is the major player, although Nvidia offers a Armas part of one of its “superchip” offerings that combines an AI chip with a traditional central processor.
Arm said 24% of its revenue came from China in its last fiscal year. This broadly matches many other companies in the semiconductor industry, but Armall revenue is generated Arm China, a separate company in which it has only an indirect 4.8% stake.
Arm said that the export controls imposed by the United States and Great Britain goGovernments and a general slowdown in the Chinese economy mean that “we expect to continue to see a decline in royalty revenue, and we may see a decline in licensing revenue, coming from” China.
Earlier in August, Reuters reported that SoftBank held talks with several technology companies, including Amazon.com and Nvidia, which are considering investing in ArmIPO.
ArmThe listing is expected to provide a much-needed boost to the IPO market, with big names including grocery delivery service Instacart, marketing automation company Klaviyo and German sandal maker Birkenstock. go public in the next weeks.
Arm said it plans to list on Nasdaq and trade under the ticker symbol ‘ARM‘.
Barclays Plc, GoIdman Sachs, JPMorgan Chase and Mizuho Financial Group are the lead underwriters to the offering. Armwhich tapped a total slate of 28 banks for the IPO, did not choose a traditional “left-lead” bank, and will split underwriter fees equally among the four major banks.
Apple and Samsung to invest in SoftBank’s Arm in IPO – Nikkei
SoftBank’s Arm Ltd targets up to $70 billion valuation in September IPO – Bloomberg News
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