ARM reports drop in fourth-quarter earnings

If EM sales slow we will be affected: ARM CEO

U.K.-based chip designer ARM Holdings saw a large drop in its fourth-quarter profit as a patent deal took some of the shine off what chief executive Simon Segars described as a "great year" for licensing sales.

Fourth-quarter pretax profit was £12.2 million ($19.8 million) versus £59.5 million a year ago. However, the Cambridge-based semiconductor and software design company increased its total dividend by 27 percent to 5.7 pence a share.

(Read more: Lightning Round: Cisco, ARM Holdings & More)

Simon Segars, chief executive of ARM, preferred to focus on annual growth at the company, saying that in the last three months of 2013 the company had taken a one-off charge relating to a patent acquisition that had impacted that line. Overall, he said, 2013 had been a "great year" for ARM.

"If you look at the overall performance of the business, it's great. [In 2013, we saw] 10 billion units [containing ARM processors] shipped by our customers, we've gone through the 50 billion milestone cumulatively of all chips containing ARM processors, I think that demonstrates how widely used the technology is and I think we're well set for future growth."

(Read more: Lots of mobile innovations ahead: ARM CEO)

The group makes and supplies components for digital electronic devices such as smartphones, including Apple and Samsung. It licenses its technology to a network of partners which then use the designs to create chips suitable for modern devices.

While total technology licensing revenues rose 28 percent in the fourth quarter from a year before, to £80.2 million, the revenue from total technology royalties rose 6 percent in the fourth quarter 2013 -- to £90.7 million from £85.5 million a year before.

Segars said the company expected royalties to grow at roughly the same level that they have over the last three years.

(Read more: ARM chief dismisses talk of smartphone saturation)

"We're clearly seeing some slowdown in the growth of high-end smartphones but overall in the market we're exposed to many other end products and product categories."

Despite a recent selloff in emerging markets, Segars said he was not overly concerned about the company's exposure to a slowdown in developing economies -- or from the prospect of cheaper competitors.

"When you think about smartphones or tablets, pretty much everyone who makes those devices is using ARM and our mantra is really about not picking winners but supplying everyone and then letting the market decide the best product that best serves consumers' needs."

"If the selloff is a reflection of consumer sentiment then obviously that does affect us – we get royalties when a consumer buys a product containing an ARM processor so if sales of those end products slow down, then ultimately we are affected but there's nothing we can do about that."

He said, however, that the long-term trend was for more embedded intelligence in devices and the business was well positioned to satisfy that need.

- By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt.