ARM Holdings, the London-based company whose chip designs reside in nearly 98% of the world’s mobile phones announced this week that it set all-time highs for both revenue and profitability during its most recent quarter.
ARM CEO Warren East, who recently dispelled recent rumors that Apple was going to buy his company, explained that the record surge in volume over the past quarter is a direct result of the rise in smartphones like the iPhone and BlackBerrys.
“The trend towards smartphones has continued, and continued throughout the downturn,” East stated, “The smarter they get the more ARM technology they require.” East further explained that smartphones are particularly profitable for ARM because they, on average, contain three or more ARM processors, a fact which “generates the company about six-times the royalty it collects from standard mobiles.”
ARM’s chip designs can be found in a slew of Apple products, from the iPhone to the iPad and even in Apple’s AirPort hardware. In light of Apple’s killer earnings last week, a baseless rumor that Apple had its eyes on ARM picked up traction for no discernible reason a few days ago. An ARM acquisition, however, would make little to no sense for Apple as they already have access to ARM’s chip designs, and hypothetically refusing to license out those designs to its competitors isn’t a practical option.
iSuppli analyst William Kidd chimes in:
Just because ARM’s IP plays an important role in mobile devices, that doesn’t necessarily man ARM is of strategic value to Apple. iSuppli thinks ARM would represent a costly acquisition with little in the way of true strategic benefits. The acquisition would not give Apple’s products a competitive edge/differentiating value. iSuppli also doesn’t buy into prevailing speculation that there could be significant value in denying other competitors access to ARM’s IP, since the majority of the impact would be felt by companies like Broadcom Samsung and Texas Instruments, which are not exactly Apple’s biggest rivals. In any case, there weould be no visible end-market impact seen for two years at a minimum.
Apple’s profits are soaring. ARM’s profits are soaring. Rocking the boat just doesn’t make sense on either end.