Analysts at Liberum claim the news could hit the UK company's outlook. Dialog has agreed to acquire US listed Atmel. Both are Arm licensees.
There has been a wave of consolidation in the semiconductor space this year. Arm has seen lots of its leading licensees merging including Qualcomm/CSR, NXP/Freescale, Intel/Altera, Intel/Spreadtrum, Avago/Broadcom, Dialog/Atmel.
rm's licensing opportunity drops as as only one licensee fee will be required from the combined entities.
Licensing is 41 per cent of Arm's revenue and often overlooked versus royalty. Arm needs a very strong licensing performance in the fourth quarter which could be a risk given this customer consolidation.
Arm's share price is also being propped up by the fact that it is a major supplier to Apple. However signs are that things are not going that well for Jobs' Mob either. If things do go pear-shaped for Apple then Arm will be gutted.