The year 2009 will be a year of technology leadership for ARM as the market demands ever smarter and more efficient ways to harness electronic products to the internet and deliver better, more interactive and more productive digital devices to consumers.
ARM has now licensed more than 580 processors to more than 200 leading semiconductor companies. About half of these companies are delivering royalty revenue to the business. We noted last year that there was an increasing trend for intelligence in electronic products; this has multiplied significantly in 2008 and we expect to see it develop further and faster in 2009, especially as smartphone functionality increases and they evolve into mobile computers and netbooks, and also as microcontrollers become ever more pervasive in our homes, offices and cars. During 2008, ARM saw a 38% increase in the number of units shipped, a remarkable achievement, and the business delivered 18% earnings growth. While semiconductor industry revenues declined slightly, ARM’s dollar revenues increased by 6% in the year. Against a backdrop of global economic uncertainty and ARM’s own financial discipline, this is a strong and hard-earned result.
Shareholders should take comfort in the robustness and flexibility of ARM’s business model, which has enabled the Company to respond to customer needs in the short term, while investing in technology that will provide them with products for the future. ARM’s reliable and consistent cash generation enables both this vital investment for the future and the ability to reward shareholder commitment with a 10% increase in dividend for 2008. The board is recommending a final dividend of 1.32 pence per share, bringing the total for the year to 2.2 pence per share.
ARM is well placed to face the likely hardships of 2009, with diverse revenue streams coming from a very wide base of industries, geographies and product applications. Approximately 50% of ARM’s revenues are generated through licensing and services agreements, with the other 50% delivered in ongoing royalties. This model reduces risk for the business and enables the development of long-term relationships with customers. The Company has noted before now that a large percentage of its revenues comes from outside the mobile applications environment that was traditionally associated with ARM.
I am pleased to report that during 2008 this was a higher proportion than ever before; approximately two thirds of licences sold in 2008 were driven by applications such as digital TV, robotics, gaming and networking, and 1.4 billion ARM processor-based chips were shipped into non-mobile devices. This trend is likely to continue to grow into 2009 and beyond.
The year 2008 was planned to be one of growing industry influence, with further productivity improvement. It is a credit to the considerable abilities and efforts of our employees world-wide that we achieved these strong results without a significant increase in headcount. At the year end, we had 1,740 full-time employees compared to 1,728 at the end of 2007. We have also had the benefit of an unchanged board during 2008 and I would like to thank all employees and my colleagues on the board for the contribution each of them has made to the continued success of the Company.
Doug Dunn, Chairman