Arm continues to extend as microchip demand soars

Cambridge-based Arm Holdings, which was founded in 1990 and now employs 1,700 people, signed 35 licences in the final three months of 2010 as its microchip technology finds its way into a wide range of electronic products.

Microsoft gave a further boost to Arm last month when it said its chips will feature in a new range of Windows-based products, including tablets and mobile phones that are due to hit the shelves in two or three years' time.

Arm's chips, which feature in the iPhone and the iPad, consume less power than traditional PC microprocessors, essential for battery-powered devices.

The FTSE 100 Index company's recent success, which helped lift its shares by around 170 per cent during 2010, was reflected in results showing it grew profits by 73 per cent to 167.4m in the year. Revenues jumped 33 per cent to 406.6m, while profits for the final quarter were 47 per cent higher at 47.6m.

Arm makes money by licensing its technology to customers and receives royalty payments every time devices with its chips are made by its clients.

Analysts at Numis Securities said underlying earnings for the fourth quarter were 14 per cent ahead of the City's consensus.

Arm, which has an office in Sheffield, said 1.1 billion of its chips were shipped into mobile devices in the quarter, while the company also highlighted its presence in non-consumer electronics, such as smart meters, with 700 million chips.

Chief executive Warren East said: "Arm continues to sign licences with influential market leaders in an increasingly digital world, and as the industry chooses Arm technology in a broadening range of electronic products, it further drives our long-term royalty opportunity.

"The growth in licensing and royalty revenues, throughout 2010, has combined to deliver our highest ever annual revenues, profits and cash generation.

"2011 will bring exciting opportunities and challenges as Arm enters competitive new markets and we are well positioned to succeed with leading technology, an innovative business model and a thriving ecosystem of partners."

Commenting on the outlook, the company said: "It is generally expected that, after a strong recovery in 2010, the semiconductor industry will see more typical growth levels in 2011.

"With Arm well positioned to continue to gain share, we expect group dollar revenues for the full-year to be at least in line with market expectations."