ARM unruffled by cellular slowdown

ARM unruffled by cellular slowdown
By Peter Clarke and Chris Edwards, EE Times
February 1, 2001 (8:02 a.m. EST)
URL: http://www.eetimes.com/story/OEG20010131S0054

LONDON — Strong sales of initial licenses for processor intellectual property (IP) helped ARM Holdings plc (Cambridge, England) record its "largest growth in revenues for the last few years," according to Pete Magowan, ARM's senior vice president of sales and marketing.

But the growth in shipments of units containing ARM IP is showing signs of moderating, the company said.

ARM's sales revenue climbed 62 percent to about $146 million in 2000, up from 47 percent the previous year. The company reported pretax profits of about $52 million in 2000, up from about $27.5 million in 1999.

While unit shipments had more than tripled to 182 million in 1999, ARM's latest estimate is that its cores and intellectual property shipped in about 400 million chips in 2000, a mere doubling.

Royalties from IP sales for the year accounted for 25 percent of the company's sales, and reached 27 percent in the year's last quarter, said Jamie Urquhart, AR M's chief operating officer. Royalties had accounted for 18 percent of sales in 1999 and 8.5 percent in 1998.

Although a slowdown in mobile phone handset sales would affect ARM royalties, as close to half of the company's business is in wireless, Magowan said the current estimates of shipments through next year would only have a 1 percent impact on revenues. ARM processor cores are widely used in mobile phone baseband chips, but the company's diversification into other areas has reducing its exposure to a slowdown. Towards the end of 2000, Urquhart said, less than half of ARM's royalty revenue came from wireless applications, with nearly 30 percent coming from networking and nearly 20 percent from consumer electronics. The company gets a few percent of its royalty revenue from storage and imaging applications.

While sales of development systems were still strong, Urquhart said an economic slowdown would have an uncertain impact on future IP sales and might reduce the number of design starts. "During these times there is often a need to off-load investment," he said.

Even if a general economic slowdown suppresses the sales of mobile phones and automobiles, Urquhart said it would still be possible for ARM to increase its absolute sales in the automotive segment by gaining market share.

"We are influenced by the communications area, but the blend is changing," said Magowan, adding that he has seen no evidence to indicate that ARM will not enjoy a good 2001.

However, ARM's royalty revenue shows up about one quarter after chip shipments, so a difficult fourth quarter experienced by ARM's semiconductor licensees would not have shown up yet in ARM's results.

Chris Edwards is editor of Electronics Times, EE Times' sister newspaper in the United Kingdom.