U.K. Chipmaker ARM Logs Quiet Success

It's a universally acknowledged truth that the British have no globally dominant tech firms. Sure, it used to have Autonomy, but that software firm's current owners, HP, have gone on record to claim its swoop on the firm was over-priced (also, in SMB accounting, Sage is a force to reckon with).

This correspondent still smarts from a swipe made years ago at a press conference linking the U.K.'s national IT profile to a poor reputation for quality in the 1970s: "The British never did hardware as they couldn't figure out a way to make it leak oil." Unfair? Probably, but the record is clear: No Apples, Facebooks, Ciscos or Intels boast a U.K. postcode.

The problem with that argument is that Britain does have a chip company as powerful as Intel -- arguably, one that's set to become dominant enough to make any Silicon Valley firm management team envious. That company is Cambridge-based ARM, which seems to have an unbreakable lock on the biggest growth area in tech: consumer devices.

[ Dell is exploring ARM-based servers for use in more energy-efficient data centers. Read more at Dell Demos 64-Bit ARM-Based Server. ]

The quiet success of the company has been brought to light by its latest results, published this week. In Q4, ARM saw 21% year on year sales growth, from $217 million to $262.8 million (the company publishes its numbers in both dollars and pounds) and pre-tax profits up 16%, to $80 million. (It boasted a quite startling operating margin of 46% on those numbers, by the way.) For its full fiscal 2012, ARM reported a 16% boost in revenues, to $913 million, pre-tax up 20% to $276.5 million, and no less than an 18% up tick in earnings per share (in British pence).

Skeptics might say that a billion dollar revenue is good, but it's hardly mega-vendor status. Sure -- but what about the fact that last year 2.5 billion chips based on licensed ARM processor technology were shipped, and 36 new such processor licenses were signed?

The key to ARM's success is in the fact that those licenses have been snapped up, as the company points out, "for a broad range of applications, from smartphones and mobile computers to medical devices and microcontrollers." There's ARM hardware in the Microsoft Surface, for example. Customers are finding ever more places to put these low-power, relatively cheap processors, from cell phones to cameras to gaming devices to, well, wherever they can.

The company is said to make the vast majority of its money from licensing agreements it signed before 2008. ARM-designed chips are in every smartphone or tablet out there, be they from Apple, Samsung or others. (ARM does not formally identify Apple as a partner, although insiders confirm the two are closely linked and Apple was an original investor in the company when it launched in 1990.) ARM processors are also present in set-top boxes, data centers processing rich media content and a host of other 21st-century computing devices. Currently, the company has deals in place with 960 third parties; 410 of which have signed contracts since 2009.

That's why it doesn't matter if ARM is smaller than Intel or other big chip makers. It's powering the ubiquitous mobile computing revolution and could end up powering tens of billions of devices.

What's even more piquant about this global success story is that ARM is a successful spinoff of just one of the many Brit contender hardware firms of the 1980s: Acorn. (This also explains the company's name -- when the chip was first designed in 1983, ARM was an acronym for Acorn RISC Machine.)

The question remains: Why is there only one ARM, great as it is? British technologists need to do better before people will stop expecting oil to leak from their offerings.

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