Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Moving on to ARM, which has come from what was
Speaker 2: in the red pre market training to a higher three
Speaker 2: and a half percent.
Speaker 3: Now this is they too.
Speaker 2: Really managed to beat out the gate when it comes
Speaker 2: to the both the top and bottom line.
Speaker 3: The company's revenue forecast was a bit of.
Speaker 2: A concern nine hundred and twenty million to nine hundred
Speaker 2: and seventy million, which.
Speaker 3: Perhaps just fell short of some expectations.
Speaker 2: But they really are maintaining their annual forecast of three
Speaker 2: point eight to four point one billion dollars in sales.
Speaker 3: So let's get into it all a little bit more ed.
Speaker 1: Yeah, I think the shares are so interesting.
Speaker 4: For maybe it's a company reporting November fifth, and it
Speaker 4: took time for the market to wake up and read
Speaker 4: the numbers a little bit.
Speaker 1: Who knows. The chip maker did give what was seen as.
Speaker 4: A sluggish sales outlook and at first disappointed investors. What
Speaker 4: has changed. Rene Huss is the CEO of ARM and
Speaker 4: joins US. Now it's really interesting right in the function
Speaker 4: of what ARM does on licensing royalties, because sometimes it's
Speaker 4: not about unit growth. I look at like revenue for example. Well,
Speaker 4: maybe some evidence renee that the Chinese consumer in particular
Speaker 4: is buying higher end handsets.
Speaker 1: How does that help you benefit?
Speaker 5: Well, good morning Ed and Caroline, and we are very
Speaker 5: happy about the quarter we just reported. Exceeded the high
Speaker 5: end of the guidance and our royalties were at a
Speaker 5: record number. And to your question, you know, one of
Speaker 5: the things that we have seen a huge benefit from
Speaker 5: with our technology going forward has been our Version nine,
Speaker 5: which commands a much higher royalty rate than we have
Speaker 5: in the past. And what that allows us to do
Speaker 5: is not exactly track the market from a unit standpoint.
Speaker 5: One of the proof points of that unit sales for smartphones.
Speaker 5: We're up four percent in the last quarter. Our royalties
Speaker 5: were up forty percent, so you can get a sense
Speaker 5: that you're seeing a very big difference. So that's really
Speaker 5: driven by two factors. One is Version nine, as I said,
Speaker 5: which commands a high royalty rate. And second, we're just
Speaker 5: seeing more armed technology inside these smartphones, particularly the premium segment,
Speaker 5: which also commands a high royalty rene.
Speaker 4: A lot of investors, people that I speak to in
Speaker 4: the world of technology think you're great. You're a great CEO,
Speaker 4: and you've been embarked on this sort of journey for
Speaker 4: profit and margin. But is there a ceiling to that, Like,
Speaker 4: at some point, how do you keep driving those levels?
Speaker 4: Are you sort of very pricing dependent at this point?
Speaker 5: I don't think so. You know, the market that we're
Speaker 5: addressing is very, very large, and one of the things
Speaker 5: that has made it even larger has been all things AI.
Speaker 5: And if you think about what ARM does we do compute,
Speaker 5: we do the CPU. Every digital device has one, and
Speaker 5: the fact that you're running all these AI workloads on
Speaker 5: devices that are already running different applications that they had
Speaker 5: to in the past, that drives a need for more
Speaker 5: and more compute capacity, which ends up ending up with ARM.
Speaker 5: So as a result, we were very very fortunate to
Speaker 5: have some tailwinds from a technology standpoint driving our growth.
Speaker 5: So as far as the ceiling, I don't think about
Speaker 5: it quite that way, But I do think where we
Speaker 5: are is a market where we just can't get enough
Speaker 5: compute capacity for all these workloads that are going to
Speaker 5: be run on every device in your home or your business.
Speaker 2: Meanwhile, though perhaps some of the tension around compute and
Speaker 2: AI has been whether China is going to quote unquote
Speaker 2: beat out the United States and that suddenly comes into
Speaker 2: a closer focus, particularly with the results of the US election.
Speaker 2: Does any of that concern you, particularly around the trade
Speaker 2: and embroilment and whether that curtails the industry and going forward.
Speaker 5: Yeah, a little hard to say, Caroline, relative to what
Speaker 5: could happen from perspective of tariffs, etc. Etc. I think
Speaker 5: the one thing that I'm happy about post the election
Speaker 5: on Tuesday is that here we are on Thursday morning
Speaker 5: and we have a result. We're not debating about what
Speaker 5: might happen or could happen or should happen. We at
Speaker 5: least have a result behind us, which is good for business,
Speaker 5: it's good for the country. Now going forward, we'll just
Speaker 5: have to see what goes forward. In terms of the
Speaker 5: things you mentioned, the China business for US has been
Speaker 5: very resilient and very strong, both in data center and
Speaker 5: phones that we've talked about, but also in the oomobile sector.
Speaker 5: So regarding your question, we'll just have to wait and see.
Speaker 3: Talk to us a.
Speaker 2: Little bit about the phone part, and in particular whether
Speaker 2: or not just US replacing less often but with much
Speaker 2: more expensive phones is going to be able to what
Speaker 2: makes your numbers resilient going forward? Will that continue to
Speaker 2: upset the fact that we're just buying fewer on them.
Speaker 5: I do, and the reason for that is when you
Speaker 5: start thinking about all of these AI agents that will
Speaker 5: increasingly be running on your smartphone, that is going to
Speaker 5: drive demand for more and more capability on these premium phones.
Speaker 5: And that's great for ARM because if you think about
Speaker 5: a next generation smartphone still has to run games, it
Speaker 5: still has to run apps, it still has to connect
Speaker 5: to the internet. But now you want to run a
Speaker 5: large language model or small language model, and you need
Speaker 5: to interface with a cloud and do security. That all
Speaker 5: requires a lot of compute, much more than in the past,
Speaker 5: which is great for ARM because you can't do it
Speaker 5: without using our technology.
Speaker 4: Renee Bloomberg reported that ARM was interested in buying some
Speaker 4: or all of Intel.
Speaker 1: What's the latest for that, please? Yeah, I read that.
Speaker 5: I'm not sure exactly where it came from, but I
Speaker 5: can't really comment on those kind of rumors.
Speaker 4: Small recent is a licensed dispute with Qualcomm, a longtime
Speaker 4: partner and customer of yours. Wouldn't it just make sense
Speaker 4: for you guys to work it out and settle and
Speaker 4: get something done so you can both just move forward.
Speaker 5: Yeah? So it's an ongoing litigation, as you know ed,
Speaker 5: and in just the baseline things, it's a.
Speaker 1: Pretty straightforward case.
Speaker 5: Consent is required anytime one company buys another company that
Speaker 5: has armed technology. Consent was not granted in this case,
Speaker 5: and just by way of history, every contract we have
Speaker 5: has this clause. And in thirty five years, I think
Speaker 5: we've done one hundred and thirty assignments and one hundred
Speaker 5: and thirty times consent has been granted. This time it wasn't.
Speaker 5: We sent a notification to Qualcom that they were in
Speaker 5: breach of the license. We're very confident in our case.
Speaker 5: But more importantly, this is about fairness. It's about equity
Speaker 5: the ecosystem. We have lots of partners who license our
Speaker 5: technology over the last decades. We need to be fair
Speaker 5: and equitable, and we just now have a situation, an
Speaker 5: unprecedented one where consent was not granted, and as a result,
Speaker 5: we took the action we thought we needed to take.
Speaker 2: How is it doing business therefore with what is a
Speaker 2: key customer but increasingly becoming more of a frenemy.
Speaker 5: Well, you know, in terms of the litigations, I said,
Speaker 5: there's not much more I can add on to it
Speaker 5: From a financial standpoint, we've made assumptions all along when
Speaker 5: we've given guidance and forecast to investors that we will
Speaker 5: not prevail in this case. So we've taken a fairly
Speaker 5: bearish position on the financial outlook. And that's really about
Speaker 5: about all I can say on it.
Speaker 4: Rene At the end market level and product level, what
Speaker 4: is the next phase farm, what's the next story you
Speaker 4: think will carry the company forward?
Speaker 5: Yeah, thanks for asking that question. You know, compute subsystems
Speaker 5: and these are all about taking the pieces of IP,
Speaker 5: stitching them together together, providing them as a full end solution,
Speaker 5: which greatly saves engineering time, time to market, time to
Speaker 5: profit for our partners. That is the direction of the company.
Speaker 5: We've seen amazing traction. We've had lots of design wins
Speaker 5: in the data center space. Media Tech just announced their
Speaker 5: first chip set recently using ARMED compute subsystems for mobile.
Speaker 5: I see that to be pervasive going forward, and it's
Speaker 5: going to allow us to not only get great benefits
Speaker 5: to the customers' markets, but those drive much higher royalties
Speaker 5: than anything we've ever done in the past, which will
Speaker 5: drive growth for us.
Speaker 2: Just paint the picture of where ARM will be in
Speaker 2: the ecosystem. Five ten years from now, you're still majority
Speaker 2: held by soft Bank in terms of your outstanding shares.
Speaker 2: MASA has some big vision one hundred billion dollars to
Speaker 2: put in in terms of creating an AI behemoth that
Speaker 2: complements what you do. But then there's also the element
Speaker 2: of whether you just stick to the designing part of
Speaker 2: the business.
Speaker 3: Where do you take this business? Renee as a CEO, we.
Speaker 5: Have a lot of optionality, Caroline in terms of the
Speaker 5: things that we do, and these are obviously the things
Speaker 5: we talk about all the time internally. Which direction do
Speaker 5: we go, how horizontal do we go, how vertical do
Speaker 5: we go. I'm not able, unfortunately to talk about unannounced
Speaker 5: products this morning with you, although I would love to,
Speaker 5: but I just can't. But we do focus very much.
Speaker 5: We do focus very much on the vertical and horizontal
Speaker 5: nature of the products and also AI and the form
Speaker 5: factors and everything that goes forward. So five to ten
Speaker 5: years ago, from five dicent years from now, I do
Speaker 5: know that ARM will be involved in computing in a
Speaker 5: very large way.
Speaker 3: I'm CEO, Rene has We appreciate the time today. Thank you,