ARM defies the downturn

UK chip designer ARM has defied the hard-hit semiconductor market and reported third quarter results that beat analysts' expectations and showed sharp rises in revenues and profits.

ARM also announced a shake-up of its management team, with former chairman and CEO Robin Saxby shifting to executive chairman, and former COO Warren East taking up the CEO reigns.

ARM's results showed revenue up 42 per cent on the previous quarter to £37.6m, with profits climbing even steeper, up 46 per cent to £12.9m.

This is despite a worldwide slump in the semiconductor market. Analysts predict that 2001 sales for the market as a whole could be down as much as 30 per cent on the previous year.

ARM said it had managed to beat the downturn because it was still signing up new customers, who licence ARM's basic technology around which future chips will be designed. Therefore this licence revenue is unaffected by a current slowdown in chip shipments.

Licence fees made up 58 per cent of ARM's revenue in the quarter in which it managed to bag eight new partners.

Royalty revenues - the fee ARM gets every time a chip based on its design is shipped - were hit by the downturn however, falling 12 per cent on the equivalent quarter in the previous year.

ARM doesn't actually make chips, it just designs them and sells the intellectual property to manufacturers.

Executive chairman Robin Saxby, told silicon.com he was very pleased with the firm's performance: "These are undoubtedly tough times for the industry - our figures show the inherent resilience of our business model.

"Currently the biggest threat to ARM is ARM itself - we have to ensure we're not complacent, or lazy, or stop listening to our customers, and that's my job to ensure that doesn't happen."

He added ARM had no plans to cut any of its 700 staff, and would meet revenue guidance for the full year.

Gartner Dataquest analyst Jim Tully, said ARM's success was underlined by the fact it was aggressively entering new markets - such as video games - at a time when most of its competitors were retreating to their core businesses.

Tully said: "These results are particularly good under these conditions - ARM's business model allows them to do much better than manufacturers at times like these."

ARM's share price rose two per cent on the news despite large falls for most on the London Stock Exchange on Monday morning.