ARM Holdings, the UK owner of the ARM processor design cores which drive the entire cellular handset industry, had a big profits leap, in line with the improving economic condition for the cellular industry. ARM beat forecasts partly because of a general drift towards smarter phones and said that it increased its market share in all its target markets.
This is despite a rising challenge from Intel’s own low power x86 platform the Atom. And after signing a broad ranging architectural license with Microsoft, we may see ARM encroaching even further on Intel’s traditional territories, right up to cloud servers.
For now, its strong results were driven by its conventional strongholds in cellphones, embedded processors and mobile gadgets. Its revenues were up 54% year-on-year in the quarter, to £100m in UK sterling (or up 42% to $150.3m in US dollar terms). Half-year dollar revenues were $293.6m, up 30% on the first half of 2009. Pre-tax profit was up 4.5 times to £29.6m, from £6.4m in the year-ago quarter. After adjusting for acquisition-related, share-based payment costs and other charges, normalized pre-tax profit was £43.5m, up 166% year-on-year.
‘Freescale, Microsoft and TSMC all recently announced adoption of ARM’s latest technology which will further increase ARM’s market penetration, and royalty potential, in a broadening range of end applications,’ said CEO Warren East in a statement. ‘ARM continued to gain share in the quarter with shipments of ARM-based chips growing faster than the industry in all target markets.’ However, East remained cautious about the outlook, saying that consumer demand later in the year remains uncertain. However, ARM said it would increase its dividend by 20%.
In the quarter, total dollar license revenues increased by 22% to $47m, representing 31% of group revenues. License revenues comprised $36.6m from processor and $10.4m from the physical IP division. Total dollar royalty revenues in Q2 increased by 67% to $82.3m, representing 55% of group revenues ($72.5m from processor and $9.8m from physical IP).
The order backlog at the end of the quarter was up more than 20% sequentially, and was now at the highest ever level, said ARM – partly because of strategic deals such as the multiyear license signed with Microsoft, and partly because of licenses signed with customers for the Eagle processor.