Market Report: Chipmakers feel pain as smartphone market slows

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A wintry chill struck the chipmaking industry, with manufacturers in Germany and Britain flagging a significant slowdown in the smartphone and semiconductor market.

Imagination Technologies, whose customers include Apple, was even forced to issue a profit warning for the full year to the end of April, after reporting “disappointing” first-half results.  

Its adjusted operating loss was £7.3 million in the six months to the end of October, versus a £5 million profit the year before, while revenues plunged 13.5% to £71.1 million.

“This has been driven by weaker smartphone sales, a contraction of the PC market and the general slowdown and build-up of inventory in China,” it said, echoing Germany’s Dialog Semiconductor which earlier slashed its revenue guidance.

Liberum said there remains value in Imagination, down 10p to 153.5p, but the broker added: “We are unsure whether it will be unlocked with the current approach”.

“This has been driven by weaker smartphone sales, a contraction of the PC market and the general slowdown and build-up of inventory in China.”

Imagination Technologies

The news also dragged FTSE 100 rival ARM Holdings down 13p to 1028p.

ARM was one of the only losers on the FTSE 100, however, with the index coming off yesterday’s three-year low.

It climbed 95.16 points to reach 5969.22, though there were concerns over how long the momentum would last.

“With oil prices slumping yet again, sustaining these gains could remain something of a challenge, with the market still in a nervous mood as we await the Federal Reserve’s decision over a rate hike tomorrow,” said Trustnet Direct’s Tony Cross.

On the FTSE 250, challenger banks were under pressure after Barclays analysts took their red pens to the sector, citing possible changes for buy-to-let mortgages.

The Basel committee on Banking Supervision has suggested banks hold more capital against buy-to-let loans, which Barclays described as a potential game-changer.

It downgraded both OneSavings Bank, down 15.9p to 329.9p, and Paragon, 6.5p lower at 351.6p, to equal weight from overweight.

Fellow FTSE 250 stock SuperGroup was also in negative territory, dropping 150p to 1466p, after a downgrade from Liberum to hold from buy. 

At the other end of the leaderboard, Tullow Oil was celebrating finding oil in northern Kenya.

It was the index’s top riser, jumping 10.7p to 162.8p.

AIM-listed law firm Gateley also raised some festive cheer, with news that six-month revenue was up 10.9% and pre-tax profit up 11.5%. The shares rose 1.5p to 103.7p.

Source Article from http://www.standard.co.uk/business/market-report-chipmakers-feel-pain-as-smartphone-market-slows-a3137996.html

December 15, 2015 |
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