ARM reports boost in earnings

The company, which designs low-powered microprocessors for cell phones, handhelds, and other devices, announces a big jump in revenue.

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ARM Holdings, which designs low-powered microprocessors for cell phones, handhelds, and other devices, reported a substantial boost in revenue and earnings today, and strengthened the argument that the company is emerging as one of the leaders in this segment.

ARM's net income for the three months through December rose to 1.89 million pounds ($3.1 million), or 18.7 cents per diluted share, from $1.3 million in the same period a year earlier. Sales rose 52 percent to $20.5 million, up from $13 million on a yearly basis.

"1998 has been an excellent year for ARM," said Robin Saxby, president and CEO, in a statement. "During the year, volume shipment of products based on the ARM architecture increased from less than 10 million units in 1997 to an estimated 50 million units in 1998," he said.

The company's future prospects are looking up as well. A large number of new products using the ARM microprocessor were launched in devices such as digital phones, games machines, set-top boxes, networking products, and a Windows CE-based sub-notebooks, the company said. Additionally, six new licensees signed on, including three Japanese companies and Intel.

ARM creates processor designs, which it then licenses to manufacturers for a royalty. Last year, sales of ARM-insprired chips were five times larger than in 1997, according to Jim Turley, embedded processor analyst with MicroDesign Resources. Competitors, including Hitachi, saw only marginal growth.

"ARM's massed hordes shipped an estimated 48 million ARM-based [processors] and standard products, far above the company's 1997 total of less than 10 million," he said. "After years of signing licensees like there was no tomorrow, ARM appears to finally be reaping what it has sown."

ARM's market value has doubled since last June when cell phone makers Nokia, Ericsson, and Motorola joined British handheld manufacturer Psion in forming a joint venture called Symbian to popularize a handheld-class operating system with wireless capabilities. (See related story).

ARM designs embedded microprocessors that can be used in devices that Symbian will produce, such as "smart phones" and wireless palmtop computers, and the technology partnership is widely expected to benefit ARM materially. Analysts expect the worldwide market for such processors to grow to $5 billion in 2001, twice what it was in 1997.

Intel acquired the StrongARM processor, a derivation of an ARM chip design, from Digital Equipment as a result of a massive legal settlement surrounding a patent dispute. ARM Holdings could benefit significantly from Intel's push to develop and sell StrongARM processors for consumer-oriented electronic devices. Neither company disclosed financial terms of the licensing agreement.

Two new StrongARM chips are expected in the second half.

In related news, Apple Computer sold 2 million shares of ARM for 36 million pounds ($59 million), cutting its stake to 7.2 million shares, representing 4.11 percent of ARM. Apple still holds 14.8 percent of ARM in a stake worth $215 million at market close.

ARM began operations in November 1990 as a venture between Apple and the U.K.'s Acorn Computers.

Bloomberg contributed to this report.