ARM posts bumper profits as the firm looks to new markets

CHIP DESIGNER ARM has bucked the trend of lacklustre financials at semiconductor firms by posting a 42 per cent increase in profits for the fourth quarter of 2011.

ARM's various chip designs power the vast majority of mobile phones and are found at the heart of many embedded systems, and with the popularity of smartphones increasing, ARM's licensing operation has netted big rewards. The firm announced revenues of £137.8m and profit before tax of £49.7m, up 42 per cent from the same quarter in 2010.

ARM emphasised its dominance in mobile markets by claiming to have signed 34 new licensees with 1.2 billion ARM chips that ended up in mobile phones and computers in just three months. On top of that the firm's architectures ended up in a further billion chips for consumer and embedded devices such as set-top boxes.

Warren East, CEO of ARM said, "2012 will bring exciting opportunities and challenges as ARM enters competitive new markets where we are well positioned to succeed with leading technology, an innovative business model and a thriving ecosystem of partners. As our customers are designing more ARM technology into their widening product portfolios, ARM is investing in the development of new products. These products will drive further long-term growth in our revenues, profits and cash."

While East was bullish on profits others might be wary of ARM's reliance on smartphone sales. Last week a report by analyst outfit Strategy Analytics showed smartphone sales growth slowing, hinting that the good times might be coming to end, as Scott Bicheno, senior analyst at Strategy Analytics said was the case in some markets.

"These numbers indicate the exponential phase is slowing, but growth rates remain healthy. There is still a lot of room left for growth in smartphones - especially in less developed markets. But even in those regions where the switch to smartphones is already quite advanced there will continue to be strong competition between platforms and among OEMs," said Bicheno.

Although Bicheno's comments urge caution for smartphone makers expecting the explosive growth to continue forever, there is a bright silver lining. Both Bicheno and East referred to new and developing markets, which are likely to power ARM's growth for some time yet. µ