(Bloomberg) -- When Apple Inc. dropped Imagination Technologies Group Plc as a supplier for iPhone technology, the British chip designer's shares plunged as much as 69 percent and the company ultimately accepted a buyout. But the U.K.'s Dialog Semiconductor Plc, which relies on Apple for about three-quarters of its revenue, isn't worried.
Following strong third-quarter earnings, Dialog Chief Executive Officer Jalal Bagherli dismissed concerns Tuesday, saying his company and Imagination have little in common other than sharing similar customers.
“If someone were to not use us they'd have to create 1,000 highly-skilled power management engineers to really replicate what we do,” Bagherli said in an interview. He said this is in contrast to Imagination, which designs technology for customers to manufacture themselves, rather than being a supplier of usable components.
The semiconductor industry has seen much consolidation over the past two years and the U.K. has been a notable target. In addition to Imagination's sale, U.K. chip designer ARM Holdings Plc was snapped up by SoftBank Group Corp. for $32 billion. Elsewhere, Dutch chipmaker NXP Semiconductors NV is the target of what was once the industry's biggest-ever deal when Qualcomm Inc. proposed a $47 billion buyout in November last year. Qualcomm itself this week received an unsolicited $105 billion bid from Broadcom Ltd.
Bagherli doesn't see the latter acquisition posing a significant threat to Dialog. “They're primarily digital companies so really they're not in areas where they impact our business directly,” he said of Qualcomm and Broadcom. “If they pull that off it creates a very large semiconductor company that competes at a much more significant level with established players like Intel Corp.”
The CEO also said his company's $276 million acquisition of U.S. startup Silego Technology Inc. was completed on Nov. 1, and is forecast to grow 15 percent next year as Dialog makes a bigger push into the connected devices, or “Internet of Things” market.
“From a diversification point of view, our strategy is working,” Bagherli said when asked about the risk of having one customer account for as much as 74 percent of its revenue. “Our investment in Bluetooth connectivity is going through the roof, and now we added Silego, which is a unique technology pillar we can offer to a range of customers rather than a single customer.”
iPhone X
Bagherli wouldn't mention his company's biggest customer by name, nor did he mention the iPhone X directly. But he did suggest some reports that the California-based company had cut orders of components for its new flagship smartphone were either inaccurate or irrelevant to Dialog's business.
He said the company's third-quarter revenue of $363 million was 2 percent above the midpoint of guidance issued in July. “If it was really halved or doubled,” Bagherli said of iPhone component orders, “we would have really underperformed on our guidance massively, or overperformed massively.”
“It's more difficult to predict the extent of the popularity but everything we see is positive,” he said. “We've got a strong backlog and hence we are guiding towards being 19 percent up year-on-year in the fourth quarter.”
On Tuesday, Dialog reported revenue that met the average analyst estimate, with adjusted operating profit of $76.6 million. It sees fourth-quarter revenue of $415 million to $455 million, with a strong backlog of orders.
To contact the reporter on this story: Nate Lanxon in London at nlanxon@bloomberg.net.
To contact the editors responsible for this story: Giles Turner at gturner35@bloomberg.net, Kim Robert McLaughlin, Molly Schuetz
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