Growing Mobile Devices Push ARM's Profits Higher

The rising adoption rate of ARM (News - Alert) processor technology in growing mobile markets like smartphones, tablets and other consumer electronics has resulted in higher profit margins for the Cambridge, U.K.-based processor IP licensor ARM Holdings plc. As a result, the microprocessor designer has reported sharp increase in profits for the fourth quarter (4Q) of 2010.

Financial results reported show that the profit before tax for the microprocessor IP developer was £34.9 ($56.22 million) in 4Q 2010 as compared to £20.1 ($32.38 million) in 4Q 2009. After adjusting for acquisition-related, share-based payments and restructuring charges, normalized profit before tax was £47.6 ($76.68 million) in 4Q 2010 compared to £32.3 ($52.04 million) in 4Q 2009, up 47 percent.

As reported, total revenues in 4Q 2010 were $179.6 million, up 28 percent over 4Q 2009. With regards to sterling revenues, the 4Q revenues were £113.9 million, up 34 percent year-on-year. By comparison, dollar revenue for the semiconductor industry was up 14 percent over the equivalent period.

Similarly, the total 2010 full-year revenues reported were $631.3 million, up 29 percent as compared to 2009 revenues. While total 2010 full-year sterling revenues reported were £406.6 million, up 33 percent on 2009. By comparison, ARM said that dollar revenue for the semiconductor industry was up 23 percent over the same period.

According to ARM, key growth drivers include processor licenses for smartphones, mobile computers, servers and smartcards, Microsoft (News - Alert) Windows support, growth in mobile applications, growth in outsourcing of new technology. While Nvidia inked both Cortex A-15 and next generation ARM architecture, Freescale (News - Alert) became ARM’s first subscription licensee for physical IP at an advanced technology node. In addition, a foundry licensed a royalty-bearing platform of physical IP. And eight licenses were signed for Mali, ARM’s advanced graphics processor.

The company also reported that total dollar license revenues in 4Q 2010 increased by 46 percent year-on-year to $65.4 million ($53.8 million from PD and $11.6 million from PIPD), representing 36 percent of group revenues.

 In a statement, said Warren East, chief executive officer, “ARM continues to sign licenses with influential market leaders in an increasingly digital world, and as the industry chooses ARM technology in a broadening range of electronic products, it further drives our long-term royalty opportunity. The growth in licensing and royalty revenues, throughout 2010, has combined to deliver our highest ever annual revenues, profits and cash generation.” He added, “2011 will bring exciting opportunities and challenges as ARM enters competitive new markets and we are well positioned to succeed with leading technology, an innovative business model and a thriving ecosystem of partners.”

ARM said that after a strong recovery in 2010, the semiconductor industry will see more typical growth levels in 2011. The company is well positioned to continue to gain share, and expects group dollar revenues for the full-year to be at least in line with market expectations.

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