Arm Holdings, the chip designer owned by SoftBank Group Corp, has reported a 1% decrease in annual revenue due to a slowdown in smartphone sales. This comes as Arm has disclosed the paperwork for its highly anticipated initial public offering (IPO), which is expected to be the largest of the year.
The decline in Arm’s revenue is primarily attributed to a slump in global smartphone shipments. In fact, over 50% of the company’s royalty revenue for the fiscal year came from smartphones and consumer electronics. However, despite the heavy reliance on smartphones for royalties, Arm’s modest decline in revenue suggests that its per-chip rates have actually increased.
Arm, whose chip technology powers most smartphones including iPhones, did not reveal specific details about the IPO, such as the number of shares it plans to sell or the valuation it will seek. However, Reuters has previously reported that SoftBank plans to sell about 10% of Arm’s shares in the IPO and aims for a valuation between $60 billion and $70 billion for the chip designer.
Arm’s IPO is expected to revive a lackluster IPO market, which has seen several high-profile startups delay their listing plans due to market volatility over the past year. The British firm has managed to weather the chip industry downturn better than most and is now venturing into lucrative segments like cloud computing.
Founded in 1990, Arm was originally a joint venture between Acorn Computers, Apple Inc, and VLSI Technology. The company was publicly listed until 2016 when SoftBank acquired it for $32 billion. SoftBank began preparing for an IPO of Arm after its deal to sell the company to Nvidia Corp for $40 billion fell through due to regulatory objections.
Arm earns revenue through upfront licensing fees for its technology as well as royalties paid on each chip sold by its customers. While the company dominates the smartphone industry and has gained a 10% market share in cloud computing, it has yet to make significant progress in the artificial intelligence (AI) market, where Nvidia is the leading player.
Arm anticipates listing on the Nasdaq under the ticker symbol ‘ARM’. Leading underwriters for the IPO include Barclays Plc, Goldman Sachs, JPMorgan Chase, and Mizuho Financial Group. While Arm has not chosen a traditional lead left bank, it will evenly distribute underwriter fees among the top four banks.
The listing of Arm is expected to inject some life into the IPO market, with other notable companies like Instacart, Klaviyo, and Birkenstock also planning to go public in the near future. Arm’s IPO will likely attract significant attention and provide a valuable boost to the semiconductor industry.
