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Chip Designer ARM's Profit Beats Expectations

Tuesday, 5 Feb 2013 | 3:54 AM ET
Tetra Images | Getty Images

British chip designer ARM reported a better-than-expected 16 percent rise in fourth-quarter pretax profit as it rode the wave of soaring sales of smartphones and tablets, nearly all of which contain its technology.

The Cambridge-based group licenses its technology to chip makers and receives a royalty on each chip shipped in devices from the likes of Apple and Samsung.

Consumers around the world are increasingly using the Internet on mobile device rather than on PCs that are powered by Intel processors.

"Five years ago an ARM processor could be found in just over a quarter of devices that you could use to browse the internet," finance director Tim Score told reporters on Tuesday.

"Last year, in 2012, three quarters of Internet connected screens and devices used an ARM processor in the main chip."

Shares in the group rose to a 12-year high after it said it would at least meet analysts' expectations for revenue in 2013.

They were trading up 6.3 percent at 948.7 pence by 0822, leading the FTSE 100 index.

ARM CEO: We're Moving Well Beyond the Mobile Space
Warren East, CEO of ARM Holdings, tells CNBC they are moving well beyond the mobile space into the infrastructure that sits around that.

The newest smartphones and tablets typically contain multiple ARM-based processors and increasingly ARM graphics as well, helping royalties for the quarter rise 19 percent to $136.8 million, strongly outperforming the market.

The company recognizes royalties a quarter in arrears, so the royalty income came on 2.5 billion chips shipped in the third quarter of the year.

Licensing revenue rose 28 percent to $100.6 million, with 15 licences signed for ARM's latest Cortex-A processors designed for mobile computing, servers and enterprise computing.

ARM said it expected to continue to outperform the wider semi-conductor market in 2013.

Analysts' current revenue expectations for 2013 stand at $1.03 billion, Score said.

ARM reported pretax profit of 80 million pounds ($125.9 million) on revenue of 164.2 million pounds, equating to earnings per share of 4.08 pence for the fourth quarter.

Analysts were expecting the group to report pretax profit of 75.6 million pounds on revenue of 152.2 million pounds.

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