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Why ARM Holdings Got Crushed After Earnings

Dominant smartphone chip designer ARM Holdings  (NASDAQ: ARMH  ) got crushed today after the company reported fourth-quarter earnings. The company swung to a loss, thanks in part to various one-time items. More importantly, all the talk of slowing growth in the high-end smartphone market is beginning to weigh on results. Processor royalty revenue was up just 7% during the quarter. Meanwhile, the average royalty per unit hit a two-year low of 4.5 cents.

Looking forward, ARM still has opportunities to capitalize on the Internet of Things. Most of the licenses that ARM inked during the quarter were for Cortex-M micro-controllers that are destined to power the Internet of Things. While micro-controllers are a low-royalty business, it can make up for it in volume. The company sees 26 billion micro-controller units being shipped into the market annually by 2018.

In this segment of Tech Teardown, Erin Kennedy discusses ARM's latest quarter with Evan Niu, CFA, our tech and telecom bureau chief.

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Evan Niu

Evan is a Senior Technology Specialist at The Motley Fool. He was previously a Senior Trading Specialist at a major discount broker. Evan graduated from the University of Texas at Austin, and is a CFA charterholder.

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Related Tickers

9/4/2015 3:59 PM
ARMH $42.58 Down -0.41 -0.95%
ARM Holdings CAPS Rating: **