ARM Celebrates Another Winning Quarter, Pockets $108M USD Pre-Taxes
October 23, 2012 4:42 PM
Ubiquitous chipmaker beats the street expectations
In his company's quarterly earnings call ARM Holdings Plc. (
) Chief Financial Officer Tim Score gushed about his company sterling 25 percent rise in royalty revenues. By contrast, other intellectual core licensers saw a more anemic 4 percent industry average.
I. The Spoils of Victory
But ARM is
. With royalty revenue now at $121.1M USD, it's pulling in almost half a billion a year in just royalties. That's the upside to being the maker of the
world's most-used mobile instruction set
; a set that is licensed by
virtually every smartphone and tablet chipmaker
While many partners merely leverage its instruction set and system-on-a-chip optimization IP, ARM has also been
its intellectual property core licensing business. ARM sells
and CPUs (the Cortex-Axx series) to third-party chipmakers, which can then incorporate those units into their designs.
A survey of 17 analysts by
The Financial Times
of £144.63M ($230.41M USD) for the revenue and a pre-tax profit of £67.4M ($107.4M USD). ARM
the revenue mark almost precisely £144.6M ($230.36M USD), while beating the profit with a deliver pre-tax result of £68.1M ($108.5M USD).
Shipments of partner-licensed ARM Cortex-A cores rose from 5 percent of the total ARM-architecture chips sold, to 9 percent, on the back of growing smartphone/tablet consumption. Royalty revenue for Cortex-A now accounts for 35 percent of ARM's total royalties, with the chip architect tacking on seven new Cortex-A licensees for the quarter. ARM also signed three new Mali licensees.
Cortex-A licensing drove ARM earnings to new heights. [Image Source: ARM Holdings]
, "ARM is sensitive to some strong growth areas, like smartphones and tablets, and those of course are the parts of the industry that are growing much faster than the average. We would expect full-year consensus revenue to go up somewhere around $10 million to $885 to $890 (million)."
That target indicates ARM Holdings' creeping progress towards the $1B USD mark in terms of annual revenue.
II. Windows RT Could Drive New Gains in Q4
The company only makes around 4.5 to 4.9 cents off each chip sold, as it does not produce full-fledged system-on-a-chip (SoC) designs and does not fabricate (or contract someone to fabricate) chips itself. But the pure licensed architecture approach has allowed ARM Holdings to stay lean and enjoy massive profit margins on its product.
As ARM charges into the world of Windows with the
launch of Windows RT
this Friday, ARM could see further gains, at the expense of traditional PC-SoC veterans like Intel Corp. (
Still, ARM Holdings' earning targets are cautious, based largely on a low-single digit holiday sales spike in mobile devices (versus an average rate of 10 percent for the holiday season).
Watch for it to likely beat that cautious prophesy in calendar Q4 2012.
FT [analyst estimates]
"A lot of people pay zero for the cellphone ... That's what it's worth." -- Apple Chief Operating Officer Timothy Cook
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