ARM Expects Better Q2 After Q1 Revenues Hit By Smartphone Slump

British chip designer ARM has reported pre-tax profits of £97.1 million for the first quarter of 2014, despite slowing smartphone sales impacting royalties.

Licence revenues increased by 33 percent year on year to £80.9 million but royalty revenues actually decreased by five percent from £91.2 million in the first quarter of 2013 to £86.8 million.

Revenues increased by ten percent year-on-year to £186.7 million as more than 2.9 billion ARM chips were shipped during the period.

ARM Q1 Results

ARM blames the royalty slump on an “inventory correction” as manufacturers used up components they had saved because of slowing demand and expects a much better market environment in the second quarter.

The firm agreed 26 new processor licensing deals during the quarter in a number of markets, boosted by demand for wearable technology and the Internet of Things (IoT), and says the wider adoption of more advanced ARM-based technology will result in higher royalties in the future.

“Q1 was a good start to the year for ARM, with more customers choosing to license ARM technology for their future products, which helped drive ARM’s revenues,” says Simon Segars, ARM CEO. “Licences are a precursor to future royalty revenues.

“Our customers are signing licences with a view to designing ARM technology into an increasingly wide range of markets from servers and supercomputers to embedded sensors and enterprise networking applications and thereby underpinning ARM’s future royalty opportunity.”

ARM has previously shrugged off fears of smartphone saturation in developed markets and has pointed cheaper mobile devices as a huge opportunity for the company. James Bruce, director of mobile solutions at ARM, told TechWeekEurope at Mobile World Congress earlier this year that the Cambridge-based firm would look to create chip designs for all price points and would look to support new device categories.

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