Whoever Wins, We're Winning Too: ARM Holdings Posts Record Earnings
February 1, 2012 11:43 AM
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2012 looks bright for ARM, even as competitors drop off
ARM Holdings plc (
) is an innovator who's been to hell and back. Born from the 1984 Acorn RISC Machine project, ARM grew under the financial investment Apple, Inc. (
) and its UK parent Acorn Computers. But mounting financial troubles at Acorn -- and to a lesser extent -- Apple threatened to sink ARM Holdings as the 90s approached. A
ultimately saved the profitable unit. Divestment of stakes in the spinoff saved Apple, although it was not enough to stop Acorn from sinking.
I. Apple's Record Profits Mean Big Profits for ARM
The brave little castaway grew from a glorified R&D project into a giant of the electronics world. From modest beginnings in hard drive and appliance microcontrollers, ARM would go on to define itself as the mobile processor architecture of choice. Virtually every smartphone and tablet sold today carries a chip that either uses
ARM's proprietary core designs
, or at the very least licenses ARM's instruction set. Today there are by far more ARM CPUs in the wild than any other kind of CPU -- including Intel Corp.'s (
) traditional PC chips.
2011 was a landmark year of ARM. While ARM has yet to wholly knock Intel out of the game, it's done its best over the last few years to marginalize it, as people have turned away time-wise from the traditional personal computer and flocked to its mobile evolution, the smartphone.
ARM Powers every smartphone on the market today, and almost all the tablets, as well. From Android to iPhone, they all use ARM. [Image Source: Esquire]
2011 saw Android
surge out to a big lead
, and then slow slightly. Towards the end of the year, in Q4 2011, ARM's old ex-investor Apple
charged back with the iPhone 4S
. But all of these phones had at least one important thing in common -- they all use ARM CPUs and they all funneled royalties/license fees to ARM Holdings.
its Q4 results on Monday afternoon, and once again it blew past analyst estimates. It pulled in 137.8M £ ($218.4M USD) in revenue -- up 20.9 percent over last year's total of 113.95M £ ($180.61M USD). The company's pre-tax profit was 69M £ ($109M USD), up 45 percent from 47.6M £ ($75.4M USD) in Q4 2010. The net profit was 33.1M £ ($52.5M USD) up from 29.7M £ ($47.1M USD).
[Image Source: World of Stock]
Analysts estimated that the company would deliver a revenue of 123.6M £ ($195.9M USD) and a pre-tax profit of 55.8M £ ($88.4M USD).
Warren East, Chief Executive Officer cheers, "In Q4 and throughout 2011 ARM has seen strong licensing growth, driven by market-leading semiconductor companies increasing their commitment to ARM technology, and more new customers choosing ARM technology for the first time. We have also seen our royalty revenue continue to grow faster than industry revenues as the ARM Partnership gains share in our target markets..."
II. Record Run Expected to Continue as ARM Attacks New Markets
Smartphones proved the biggest boost for ARM Holdings. In a phone conference Chief Financial Officer Tim Score said that a single smartphone could earn ARM as much revenue as five to ten feature (voice-only) phones.
ARM CPUs shipped in Q4 2011, and the company shows no signs of slowing down. It added 25 new licensees in Q4 2011. Among them is Hewlett-Packard Comp. (
) who is cooking up
the world's first ARM-based servers
. ARM also looks to invade the laptop segment, with the launch of Microsoft Corp.'s (
ARM-friendly Windows 8
ARM will power Windows laptops and tablets later this year. After sluggish delivery by Intel, Microsoft finally opened the gates to ARM and its partners with the new OS.
Even as chipmakers like Intel have slashed their outlets due to sluggish sales expectations for 2012, ARM is posting bold predictions. It expects revenue to rise to 126.2M £ ($200M USD) or more in calendar Q1 2012. And it expects a total revenue of 542.6M £ ($860M USD) for the the year.
The future looks truly bright for ARM as it maintains its ubiquitous dominance of the mobile space and begins to expand into new markets.
WSJ [Analyst estimates]
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RE: That is one fat profit margin
2/1/2012 9:06:04 PM
I agree. Intel has always been targeting their "real" entry with 22nm which was necessary to get the power & size way down. Until 22nm, they can't really compete with the small and power-stingy ARM. With 22nm, they're ahead of ARM.
They did the same thing with their first Celeron back in 1998. All Intel did was take the 2 L2 cache chips of the 300MHz Pentium 2 cartridge, then dropped the price way down to undercut AMD in the low end. People laughed at the performance without L2 cache but it got their foot in the door until they came out with their single chip version with integrated L2 cache. And it didn't hurt that the cache-less Celeron could be overclocked from 300MHz to 450MHz. It took the low end market over by storm.
These early 45nm & 32nm smartphones gets Intel's foot in the door to get manufacturing started, to get software built up, and to fine tune the product until 22nm is out. Similar to the Celeron going from 3 chips to 1, Intel smartphone entry started at 2 chips on 45nm, then to 1 SOC on 32nm, next to 22nm. It's just like a Tsunami. Early on, it's just a ripple, but when it hits shore, it's devastating.
Dumb ? Hardly. ARM just had record revenue & profit. That's great. Intel just had their 7th record-breaking quarter in a row and continue to smash both revenue & profit records. All that while spending tons of money on new Fabs.
The naysayers here don't know their tech history and don't understand the power of Moore's Law.
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