ARM's big.LITTLE architecture, part of its Cortex-A50 processor series; image via ARMFinancial results from Apple, and now ARM Holdings, may help dispel recent concerns that the market for high-end smartphones has already reached its peak. ARM, which designs chips for a range of mobile products including the iPhone and iPad, announced that its second quarter sales had increased by more than a quarter to 171.2 million pounds ($263 million), above the 165.1 million pounds expected by analysts, according to estimates compiled by Bloomberg.
Some $102.6 million, or 39% of group sales came from licensing revenue, which grew 31% year on year. Royalty revenues, which made up half of ARM's sales, rose 23% to $135.3 million.
As a company which designs rather than manufactures chips ARM benefits from relatively low overheads and high margins - but its gross margins fell slightly for the second quarter, to 94.3%, from 95.1% last year.
ARM's profits also dropped to 15 million pounds ($23 million), which the company blamed on expenses it has put aside that to cover patent litigation costs totalling $63.4 million. The company did not provide details on the settlements.
Shares of Cambridge, U.K.-based ARM Holdings were largely flat in Wednesday afternoon trading in London at 898.5 pence, having risen 18% since the start of the year.
For the last few years ARM has benefited from the rapid growth in mobile technology, as vendors such as Apple and Samsung have required small, low-powered chips for devices that rely on heavy processing technology.
When Samsung recently unveiled a sales outlook that fell below analysts' expectations, and HTC and BlackBerry made similar announcements, there were concerns that the high-end smartphone market was becoming saturated, a development which could potentially hurt ARM's business too as the global architect for popular mobile chip designs.
On Tuesday, however, financial results from Apple seemed to defy that trend. While the company's quarterly profits fell and gross margins narrowed, Apple said it had sold 31.2 million iPhones, up from 26 million a year ago, and beating the expectations of Wall Street analysts who had mostly forecast unit sales in the high 20 millions.
ARM's new chief executive, Simon Segars confronted questions about a deflating, global smartphone market in Wednesday's conference call with investors. "It's easy to think that everybody on the planet has a smartphone," he said, "but actually when you look at global penetration of smartphones it's actually quite low."
news by July 24, 2013 at 10:04PM
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