By Lisa Fleisher
LONDON--British microchip designer ARM Holdings PLC beat profit
expectations for the fourth quarter, after spending heavily in the
year-ago period acquiring patents and benefiting from the voracious
appetite for ever-faster smartphones.
ARM reported net profit of GBP72.8 million ($111 million), or
5.1 pence a share, up from a loss of GBP6.2 million, or 0.4 pence a
share, in the fourth quarter of 2014. Revenue was GBP225.9 million
for the three months ended Dec. 31, up 19% from GBP189.1
million.
ARM, which designs the basic chip technology found in more than
95% of all smartphones, reported strong demand for both the
sophisticated processors that power phones such as Apple Inc.'s
iPhone 6, as well as for the lower-energy chips used in simpler
objects like fitness bands and other sensors.
Investors cheered the better-than-expected results, boosting
shares as much as 4.6% early Wednesday. ARM also said it would
increase its dividend to 4.5 pence, pushing its full 2014 dividend
up 23% to 7 pence.
The industry is "spending money on getting access to new
technology to develop new products for the future," said Chief
Executive Simon Segars.
ARM makes money by licensing its designs to chip makers, then
collecting royalty revenue when the chips ship. After striking
licensing deals for its most sophisticated new processor design,
called the v8, ARM said it received royalty payments in the fourth
quarter from seven of its customers for the chips, up from five
customers in the previous quarter and one in the fourth quarter a
year ago.
That includes some royalty revenue from the use of the v8 in
Apple's new iPhone 6 and 6 Plus. Still, ARM said most of the
revenue from record iPhone sales would show up in its fiscal first
quarter. Smartphones with the latest version are a "very, very
small portion" of the fourth-quarter results, Chief Financial
Officer Tim Score said.
Although Apple has been ahead of the pack rolling out the most
powerful and sophisticated phones, other companies aren't far
behind. Mr. Segars said he expected to see several phone makers
adopt v8 chips.
Overall, the industry is churning out an increasing number of
chips, leading to a record 12 billion ARM-based chips shipped in
2014, including 3.5 billion in the fourth quarter, the company
said. But more of those chips are less expensive, meaning that the
average royalty revenue from each chip sold decreased to 4.3 cents
from 4.5 cents a year earlier.
Processor royalty revenue was up 16% year over year, following a
weaker performance a year earlier due to an inventory backlog in
the industry. Licensing revenue was up 27% on the year to $162.3
million, mainly based on 53 licenses signed for processor
designs.
Write to Lisa Fleisher at lisa.fleisher@wsj.com
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