ARM Fourth-Quarter Profit Soars on Chips for Smartphones, Tablet Computers

ARM Holdings Plc, which designs semiconductors that power Apple Inc.’s iPhone, said fourth- quarter profit climbed 72 percent on increased shipments of chips used in tablet computers.

Net income in the three months ended December 31 rose to 29.7 million pounds ($47.7 million) from 17.3 million pounds a year earlier, the Cambridge, England-based company said today in a statement. Sales advanced 34 percent to 113.9 million pounds. Analysts had estimated revenue at 105.8 million pounds in a Bloomberg survey.

ARM is seeking to broaden its range of product designs with technology companies to take on Intel Corp., the world’s biggest computer chipmaker. Semiconductors based on ARM’s designs are used in most tablet computers, including Apple’s iPad, and the company is also targeting the server computing market.

“The appeal of the ARM story is hard to deny,” Lee Simpson and Andrej Krneta, analysts at Jefferies, said in a note to clients today. The company has an “ubiquitous architecture, ramping handset complexity and new market penetration.”

More than 100 tablet computers were on display at the International Consumer Electronics Show in Las Vegas this year. “Most tablets that we can see coming forward are ARM-based,” Chief Financial Officer Tim Score said today on a conference call with reporters.

ARM shares rose as much as 3.7 percent to 535 pence and traded 2.6 percent higher at 529.5 pence as of 10:24 a.m. in London.

Royalty Revenue

“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,” Chief Executive Officer Warren East said in the statement.

ARM said it received fourth-quarter royalty revenue from the sale of 1.8 billion processor chips with its designs. The semiconductor market will probably grow between 5 percent and 8 percent in 2011, Score said today.

“It is generally expected that, after a strong recovery in 2010, the semiconductor industry will see more typical growth levels in 2011,” ARM said. Microsoft Corp. has said the next version of its Windows operating system will run on ARM’s chip designs for the first time. The Windows software will be tailored for battery-powered products, such as tablets, netbooks and other handhelds, Redmond, Washington-based Microsoft said. ARM will start receiving royalties from the chips in about two years.

To contact the reporter on this story: Jonathan Browning in London jbrowning9@bloomberg.net.

To contact the editor responsible for this story: Vidya Root at vroot@bloomberg.net.

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