ARM profits rise, record high backlog - Embedded.com

ARM profits rise, record high backlog

LONDON – ARM Holdings plc unaudited results for Q3 2010 show an increase in profit to £14.8 million (about $23.5million) compared to £6.9 million (about $11m million) for the same quarter in 2009.  Revenue grew to £100.4 million (about $158.1 million) from Q3 2009 revenue of £75.2 million (about $119 million).

The company said it expects continued revenue growth in the fourth quarter on the back of increasing adoption of its technology.

In the quarter 900 million ARM-processor based chips were shipped in mobile devices and four processor licenses signed for mobile phone and computing applications.

The company is seeing growth beyond mobile with increased share in target markets such as consumer electronics and embedded products with 600 million ARM-processor based chips shipped in everything from toys to televisions, cameras to cars.

The company's customers also signed 18 processor licenses for a broad range of applications including advanced processors for use in new markets such as network infrastructure and sensors. For technology outsourcing three licenses have been taken out for royalty-bearing platforms of physical IP at advanced nodes and mature nodes including TSMC licensing physical IP for 28nm and 20nm and two licenses for Mali, ARM’s advanced graphics processor.

“Q3 was a good quarter for ARM,” said Warren East, ARM's Chief Executive Officer. “Not only are we benefiting from growth in applications where we are the established market leader, including in smartphones and mobile computers, but we are gaining share in markets like digital TV and microcontrollers.  Our partners are also starting to develop chips in new markets for ARM, such as servers and laptops, creating longer-term opportunities.  In addition, both physical IP and Mali graphics performed well with important license wins and increasing royalty revenues.”

East added that the broadening growth opportunities that are available has seen accelerated investment in R&D in the first nine months of the year. Normalised research and development expenses were £26.4 million in Q3 2010, representing 26% of revenues, compared to £26.4 million in Q2 2010 and £21.5 million in Q3 2009.

Total royalty revenues in Q3 2010 increased year-on-year by 31 percent to $81.7 million, representing 52 percent of group revenues. Royalty revenues comprised $70.4 million from PD and $11.3 million from PIPD.  Royalties are recognised one quarter in arrears with royalties in Q3 generated from semiconductor unit shipments in Q2.

Year-to-date dollar revenues amounted to $451.7 million, up 29 percent on 2009.

Sales of development systems in Q3 2010 were $15.6 million, an increase of 11 percent year-on-year and representing 10 percent of group revenues.  Three large software tools deals were signed during the quarter and, says ARM, given that deals of this type are infrequent, development system revenues in Q4 2010 are expected to be closer to Q2 2010 revenues of $13.4 million.

Group order backlog at the end of Q3 2010 is up more than 10 percent sequentially. This is ARM’s highest ever backlog, driven partly by long-term strategic deals, including TSMC licensing ARM’s advanced physical IP and a major semiconductor company acquiring an architecture license.

Shipments of ARM processor-based microcontrollers grew over 65 percent year-on-year, compared to about 50 percent for the overall microcontroller market.  The majority of this growth was due to a tenfold increase in the sale of Cortex-M based chips for microcontrollers.

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