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Smartphone, tablet demand boosts profits for ARM

The sheer number of gadgets using ARM chips certainly helped drive the gains. But for the fourth quarter, it was actually royalties that made the biggest difference.

Lance Whitney Contributing Writer
Lance Whitney is a freelance technology writer and trainer and a former IT professional. He's written for Time, CNET, PCMag, and several other publications. He's the author of two tech books--one on Windows and another on LinkedIn.
Lance Whitney
2 min read

ARM can thank the booming smartphone and tablet market for its solid fourth-quarter performance.

With its chips popping up in the iPhone and an array of other mobile devices, the U.K.-based company saw its pretax profit surge 45 percent to 69 million pounds ($108 million), while its sales rose 21 percent to $217 million.

But it's actually the royalties that provided the biggest boost. The company takes home a royalty for every ARM-based product sold along with a license to use its technology, notes the Wall Street Journal (subscription required)

As a result, fourth-quarter royalty sales grew by 22 percent to $114.7 million, accounting for more than half of the total group revenues. For the quarter, the company sold around 2.2 billion of its chips, the highest number ever of ARM processor-based shipments.

Although ARM sells chips for a variety of devices, including PCs and household appliances, the growth in mobile computing and high-end smartphones has provided the greatest kick. Shipments of the Cortex-A-based wireless and mobile computing chips more than doubled from the year-ago quarter.

ARM also does better dollarwise when more of its technology is built into the chip, as was seen with the Cortex-A processsor. Though the number of ARM-based chips for mobile devices grew by 10 percent last quarter, the value the company derived from those chip sales rose by 20 percent.

"In Q4 and throughout 2011, ARM has seen strong licensing growth, driven by market-leading semiconductor companies increasing their commitment to ARM technology, and more new customers choosing ARM technology for the first time," CEO Warren East said in a statement. "We have also seen our royalty revenue continue to grow faster than industry revenues as the ARM Partnership gains share in our target markets."

But looking at the current quarter, ARM is expecting sales to fall to $200 million in light of the strong license revenues and an overall projected downturn in semiconductor sales, both during the fourth quarter.