Smartphones and tablets boost ARM’s sales

Smartphones and tablets helped ARM beat its quarterly forecasts, posting a 22% jump in profits.

The Cambridge-based chip designer said its third-quarter pretax profit jumped to £68.1 million on revenue 20% higher at £144.6 million.

“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,” chief financial officer Tim Score told reporters.

Score said the strong result was largely due to a 25% rise in royalties to $121.1 million, about $6 million ahead of expectations and far outstripping the 4% growth in industry revenues.

Sales of ARM’s more expensive Cortex-A designs, which are used by Apple and by Qualcomm for its Snapdragon chips, were particularly strong, Score said.

Cortex-A accounted for 9% of shipments, up from 5% a year ago, but it accounted for 35% of royalties, the company said. The technology helped average royalty rates per chip rise to 4.9 cents from 4.4 cents.

Licensing demand for Cortex technology was also strong, with seven Cortex-A licenses out of a total 29 signed in the quarter, helping total licensing revenue rise 15%, the company said.

“ARM’s Cortex-A class technology is increasingly being used beyond mobile and mobile computing applications, and this quarter we saw Cortex-A licenses for gaming, digital TVs, home entertainment systems, servers and GPS navigation systems,” the company added.

ARM, which reports royalty revenues a quarter in arrears, said indications from its chip-making customers pointed to a moderate sequential increase in royalty revenue in the final quarter, reflecting caution about holiday period sales.

Score said the semiconductor industry expected to see a low-single-digit percentage uplift quarter-on-quarter for the holiday period, rather than about the 10% growth usually seen.