Today, ARM Holdings is a $1.5 billion company with +15% year-to-year growth, nice financials (such as 96.7% gross margin), and a 46.7% operating margin….
15 billion ARM-based chips for $1.5 billion revenue means that, on average, ARM gets a licensing revenue of 10 cents per chip, and spends a little less than of half of that, 4.7 cents, to generate such revenue. It sure beats today’s Windows PC business and its measly 5% to 7% operating margins in the best of cases.
There’s some proper, and surprisingly concise deal analysis over there:
While growth has come from the IoT, ARM’s resurgence in recent years – and Intel’s opposite trajectory – have been the result of the London company’s dominance in mobile devices. (In 2015, “45% of the ARM-based chips went into mobile devices.”) The so-called Wintel monopoly carried both of those parties to valuations that ARM never approached, but as mobile steadily eroded PC spend ARM’s low power designs found success on both of the most successful mobile platforms. Both Apple’s iOS devices and Android’s array of hardware are either exclusively or nearly so ARM-based.
Check out the rest!
Meanwhile, from John Abbott at 451 Research:
- ARM “generated less than $1.5bn in revenue last year and has only 3,300 employee”
- “SoftBank will pay 20.9x trailing revenue for ARM. That’s the first time any company has cracked the 20x mark in a $1bn-plus chip acquisition.”
- ARM “holds a 40% share in consumer goods, 30% in embedded intelligence, 15% in network infrastructure and 10% in automotive.”
- “Revenue reached $1.49bn in 2015, up 15% from the previous year, with a net profit of $360.7m.”
- Read more for his overall sentiment, which is basically: SoftBanks’ money and reach can fuel faster marketshare growth in these convert all the toasters to IoT grills times. checks out.
Shankland covers it well. In summary: more memory, speed of course, and the possibility of sync’ing up with laptops. Also, this one of those things that could turn into nasty technical debt if don’t transition early enough.
As Galen Gruman puts it, going to 64 bit:
sets the stage for Apple devices to replace PCs in the next few years, removing one of the performance caps in current models. (ARM, which designs the basic architecture used by Apple and others, is moving to 64-bit designs as well, but for servers first. So the 64-bit A7 is Apple’s early move on that trend in the mass market ARM isn’t focused on.) The performance gap between an iPad and a PC is already not that great; I bet it will disappear in a couple years.