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ARM posts bumper profits, Texas Instruments and ST Microelectronics falter

Licensing is the name of the game
Tue Oct 25 2011, 11:15

CHIP DESIGNER ARM reported 44 per cent growth in third quarter profits despite seeing "below seasonal growth" in the chip industry.

ARM, which licenses its processor architecture to just about every chip maker, posted its third quarter 2011 results showing £120.2m in revenue, a 20 per cent increase from the previous year. Even more impressive was ARM's pre-tax profit, which rose to £55.8m, a 44 per cent increase.

Warren East, CEO of ARM said the company enjoyed a 50 per cent increase in shipping chips that end up in non-mobile devices, such as televisions and networking applications. East also hinted that ARM's financials could have been even better but for lacklustre demand in the chip business, commenting, "Royalty revenues in Q3 have been impacted by the below seasonal growth in the semiconductor industry, but we continue to gain share. With customers looking to design ARM technology into a widening product portfolio, ARM is continuing to invest in the development of new products to drive long-term growth in our revenues, profits and cash."

While ARM posted bumper profits, a couple of its licensees didn't fare so well. Texas Instruments (TI) and ST Microelectronics, which supply chips to numerous smartphone makers, both missed their sales estimates. TI reported revenue of $3.26bn, but analysts had expected the firm to post $3.57bn. It was a similar story at ST Microelectronics, with the firm expecting revenue to come in between $2.15bn and $2.3bn, falling short of the average analyst estimate $2.52bn, according to Bloomberg.

Kevin March, TI's CFO tried to paint a rosy picture for the firm's future, telling Bloomberg, "We think that a bottoming process has begun. ... It's hard to say that we can declare victory and we've achieved a bottom yet."

It's not all that surprising to see ARM posting bumper financials. After all, the firm has no real competition in the extremely fast growing mobile phone market. ARM has a spring in its step, with the company forecasting a strong fourth quarter, and unlike TI and ST Microelectronics the firm said it expects to meet current market expectations for full-year 2011 revenue estimates of $763m. µ


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