Two modern proverbs suggest themselves when looking at ARM Holdings plc’s corporate earnings: When you’re at the bottom of a very deep well, all directions point up. And when you and a partner are being chased by a bear, you only need outrun your partner. ARM CEO Warren East reinforced these points rather explicitly Feb. 2 when he pointed out that revenues and income were still falling in the fourth quarter, but ARM still outpaced the semiconductor industry.
That’s hardly a surprise. Not only is an ARM core in all smartbooks as well as the A4 in the new Apple iPad, it is gradually displacing other RISC cores in a variety of embedded and consumer applications. Right now, the MIPS core looks like the only long-term contender to total ARM dominance.
Let’s keep in mind that, being a specialist in the licensing of intellectual-property cores rather than the supplier of physical chips, ARM still is a long way from being a billion-dollar company. In fact, its fiscal 2009 sales of $489.5 million actually shrunk from 2008’s $546.2 million (as did fourth-quarter sales, $140 million compared to $149.4 million). Net income similarly was down for the year, $154 million in 2009 compared to $160 million a year earlier.
But East rightly pointed out that ARM’s dollar revenues were only down approximately 10 percent, while the chip industry at large was down 20 percent. Since ARM is designed in to digital TVs, smartphones, smartbooks, and microcontrollers used in industrial applications, the company is spreading its bets around the table more than just about any of the big chip players, or its major licensees. Broadcom and Marvell are focused on enterprise networking, Qualcomm’s strongest base is in wireless communications, and Intel is weak outside control-plane microprocessors. Even the mighty Texas Instruments has seen DSP chips decline so much, it is re-emphasizing analog – and oh, yes, its microcontrollers based on ARM cores.
Let’s see, that seems to suggest the ultimate win-win: Chip industry grows, ARM gains; chip competitors lose market share, ARM gains. No wonder the company is happy about lackluster results.
Loring
