by Echo Wang and Svaya Herbst-Bellis
NEW YORK, Sept 7 (Reuters) – SoftBank Group Corp’s Arm Holdings Plc told potential investors on Thursday in its nearly $5 billion initial public offering that cloud computing expansion and royalty revenue represent key growth areas for the chip designer .
At a gathering of more than 100 investors at one of New York’s most luxurious hotels, Arm Chief Executive René Haas and his management team gave details about the company’s prospects beyond the mobile phone market, of which it already has 99% of the market. The % stake orders the people who were said to be present.
Arm’s revenue has stagnated due to weak mobile demand during the global economic downturn. Total sales in the 12 months to the end of March stood at $2.68 billion, compared to $2.7 billion in the previous period.
Arm is seeking a valuation on an all-in basis of $50 billion to $54.5 billion, down from the $64 billion it offered to SoftBank last month in a transaction with the $100 billion Vision Fund, which it manages.
Although some investors and bankers Reuters spoke to after the presentation were upbeat, it was unclear how strong the reception to the IPO would be. Arm has already secured the participation of several customers including Apple Inc, Nvidia Corp and Alphabet Inc as investors in the IPO. The books to close and the offer price to be determined are scheduled for September 13.
Arm told potential investors on Thursday that the cloud computing market, of which it has only a 10% share and therefore has more room for expansion, is expected to grow at an annual rate of 17% through 2025, partly thanks to advances in artificial intelligence. Thank you. The automotive market, which accounts for 41%, is projected to grow by 16%, while the mobile market is expected to grow by only 6%.
“He added that Apple uses 100% Arm architecture (due to Arm’s dominance in smart phones). The future growth driver is to expand market share in the Windows PC market,” said Ryuta Makino, a research analyst at Gabelli Funds. Said.
Arm also told investors that its royalty fees, which account for most of its revenue, had been piling up since it began collecting them in the early 1990s. Royalty revenue totaled $1.68 billion in the latest fiscal year, up from $1.56 billion a year earlier.
One area of scrutiny for investors has been Arm’s exposure to China given geopolitical tensions with the United States, which has led to a race to secure chip supplies. Sales in China would account for 24.5% of Arm’s $2.68 billion in revenue in FY2023.
Virtually all revenue comes from Arm China, an independent entity that has exclusive rights to distribute Arm’s technology in the country and is Arm’s largest customer. The company’s IPO filing states that ARM China has a history of late payments and that it presents a “significant risk” to Arm’s business.
Arm said in the filing that it owed $386.9 million to Arm China as of the end of March. Arm’s chief financial officer told investors during the marketing of the IPO that the company was not concerned about getting paid back. (Reporting by Echo Wang and Swea Herbst-Bellis in New York; Additional reporting by Max Cherney in San Francisco; Editing by Greg Roumeliotis and Richard Chang)
Source: finance.yahoo.com
