ARM Beats Profit, Revenue Expectations, but Misses on Margin Growth
July 24, 2013 3:15 PM
Generally Q2 2013 was still a good show for ARM, though who was buffered from smartphone slump on the high end
ARM Holdings plc (
) continues to perform bullishly,
its pre-tax profit for the second calendar quarter (ending in June) to £86.6M ($132.4M USD), up 30 percent
from Q2 2012
As the producer of the most-used architecture and instruction set for tablets and smartphones, ARM is a classic story of a company positioning itself in the right place at the right time. As most of its revenue (£171.2M ($262.8M USD) in Q2 2013) comes from licensing, the company is free of much in the way of supply chain/manufacturing expenses and enjoys gaudy margins (48.6 percent in Q2 2013).
The only real disappointment/miss amidst another strong quarter for ARM was its margin growth.
of 12 analysts by UK-based
, a Pearson PLC unit (
), had predicted a pre-tax profit of £83.4M ($128.1M USD) on a revenue of £165.2M ($253.6M USD) (a margin of 50.5).
The lower-than-hoped margin, coupled with concerns about the general slowdown in smartphone sales caused ARM stock to drop 1 percent in Wed. trading, despite the increase in profit.
ARM engineers in Austin, Tex. show off partner products. [Image Source: My Statesman]
On a year-to-year basis, ARM-architecture chip shipments increased 20 percent, reaching 2.4 billion, roughly 800 million a month. The company signed 25 new licensees, including 7 licensees of its
Mali graphics cores
and 5 Cortex-A CPU core licensees.
ARM's new chief executive officer Simon Segars in
an earnings call
states that his firm is just getting started, remarking, "[The] smartphone market itself, as I said is developing in quite interesting ways, and it's easy to think that everybody on the planet has a smartphone, but actually when you look at global penetration of smartphones it's actually quite low."
He points out that while sales of high-end smartphones like devices from Apple, Inc. (
) and Samsung Electronics Comp., Ltd. (
) have stagnated in recent months, overall budget and mid-range models are continuing strong growth.
Mr. Segars estimates the mid-range market will reach 500 million units by 2017. ARM is targeting the Cortex-A12 core at the segment. Its high end offerings are currently anchored by the big.LITTLE paired Cortex-A15/Cortex-A7 companion core model. The CEO plugged Samsung's
new Exynos 5420 chip
, the first octacore ARM processor to use this model.
The Samsung Exynos 5420, is the first A15/A7 big.LITTLE octacore SoC.
Looking ahead, in addition to mobile growth, ARM is Mr. Segars says his firm will continue to look to establish a beachhead in the
traditional personal computer
. ARM was recently boosted when Advanced Micro Devices, Inc. (
), the second largest producer of server CPUs, announced it would be
move away from x86
transition its server lineup to use ARM cores
. However, in the PC market
with Microsoft Corp.'s (
Windows RT have struggled
. Google Inc. (
Chromebooks containing ARM chips
have been strong sellers, though, driving ARM to a small laptop market share.
Mr. Segars says embedded networking controllers is another key area of future growth for ARM, as data traffic skyrockets globally.
ARM [press releases]
Seeking Alpha [earnings call transcript[
FT [analyst estimates]
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