ARM scooping in cash but remains cautious
From iPhone A4 and rivals' Snapdragon to washing machines
ARM has outperformed estimates for the second quarter, increasing revenue by 18 per cent as its chips continue to be embedded in everything from mobile phones to washing machines.
More than a billion chips, based on licensed ARM designs, shipped during the second quarter of 2011. That pushed the company's pre-tax profits up to £54.2m on revenue of £117.8m, well above analysts' estimates of £45.3m. But the company is still cautious about the rest of the year, with its own predictions for the whole of 2011 unchanged.
ARM chips form the heart of just about every telephone, landline or mobile, from the latest iPhone to the bargain-basement handsets. ARM makes a lot more money from the high-end chips in the latest smartphones, and is nervous of prevailing economic conditions that seem to dictate slowing smartphone sales as the year progresses. ARM's ubiquity should mitigate against that to some extent, but that won't boost the bottom line to the same extent.
The company also has aspirations in the server business, not to mention powering the much-hyped Chrome OS devices, which are expected to multiply over the next year or so.
ARM doesn't make chips, it only designs cores which can be incorporated into system designs. Older ARM chips turn up all over the place, but it is the more recent designs which attract a premium.
The A4 chip, inside the iPhone, shares a recent ARM core with Qualcomm's Snapdragon, so despite the fact that the two processors have little else in common, ARM makes money from both of them. ®
My thoughts entirely
But then wondered if bumping their license fees would be counterproductive - i.e they sell less stuff. ARM seem to be playing a long game here - ensure their market stays with them - rather than go for all out profit and succumb to Intel.
Still, 54mil profit out of 117m rev is a pretty good percentage. Must keep them in beer and skittles.
@gordon 10 - Peanuts
That may be so, but at the same time if they bumped the license fees then Apple et al would just go somewhere else.
I think it's an excellent example of a company making a fair profit out of licensing their IP without being too greedy.
Remember that a large part of the cost of chips goes into the foundry, which ARM doesn't have. That means less profit, but also less capital tied up.
I find it a constant source of bemusement that inspite of their chips ubiquity Arm barely makes any money from them whilst the arm vendors make billions.
Obviously the light licensing costs have helped Arm get to where it is now, but isn't there an argument to say they are under valuing the potential license fees to be earnt?
Errr, no, A4 does not share a core design with the Snapdragon...
The snapdragon is Qualcomm's own ISA implementation of an ARMv7 core; it's not related to the Cortex A8 in the A4 or the Cortex A9's in the A5, both of which are the ARM implementations of the ARMv7 ISA.