ARM revenues take a hit on slow smartphone sales

British chip designer ARM Holdings said the slowdown in demand for Apple and Samsung smartphones had resulted in a less than expected increase in fourth-quarter royalty revenues.

ARM, whose technology powered every smartphone, posted processor royalties of $130.4 million, up 7 per cent, but which fell short of analyst forecasts of $137.9 million.

The top-end smartphone market had showed signs of reaching saturation, as Apple and Samsung, both ARM customers, last month saw sales of both the iPhone 5S and Galaxy S4 phones at lower levels in the holiday season.

However, according to the Cambridge-based company, there existed a strong demand for licensing its technology across a whole range of applications from servers to dishwashers, exercise machines and wearable technology such as smart watches.

According to ARM, its royalties continued to increase at a faster pace than the broader semiconductor market, however, the degree of out-performance was impacted by slower sales of chips for high-end smartphones in the second half of the year.

According to chief financial officer Tim Score, the smartphones, which provided just under half of ARM's royalty revenue, were ''slowing down'' at the very high end, but cheaper devices were selling well.

Meanwhile, ARM noted, "ARM's full year 2013 processor royalty revenue grew faster than the overall semiconductor industry by 18 percentage points.''

In a statement ARM CEO Simon Segars, announcing the numbers, highlighted a couple of milestones the company achieved during the year.

"ARM's Partners reported that they had shipped 2.9 billion ARM-based chips, a record number despite slower growth of chips for premium smartphones," he said. "This takes our cumulative shipments since 1993 to more than 50 billion chips, with over 10 billion reported as shipped in 2013 alone."

Segars added, "ARM saw good progress in Q4 as our latest technology was chosen by major companies in all our target markets, with further licenses signed for our latest ARMv8-A processors, Mali graphics processors and physical IP technology.

He added, ''These wins will help to drive ARM's future royalty revenues."

In its outlook for the quarter the company wrote for the upcoming quarter, "... we enter 2014 with a strong opening order backlog and a healthy pipeline of licensing opportunities."

ARM, however reported a net loss in the quarter of £6.2 million, which it ascribed to one-off charges, taxes and impairments. Among the latter, was £59.5 million charge after some expected licensing revenue from Bridge Crossing (a consortium in which ARM itself is a stakeholder) failed to materialise.