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Warren East, who led ARM Holdings from start-up to near monopoly designer of smartphone chips, with its processors at the heart of Apple’s iPhone and Samsung’s Galaxy, is to step down as chief executive after 12 years. A pound invested in the company’s shares 10 years ago would be worth about 18 pounds now, and the company itself is valued at nearly 13 billion pounds ($19 billion).

ARM’s CEO Warren East to step down after 12 years

10:32am EDT

By Rosalba O‘Brien and Paul Sandle

ARM CEO East speaks during a Samsung Electronics keynote address at the CES in Las VegasARM

LONDON (Reuters) – Warren East, who led ARM Holdings from start-up to near monopoly designer of smartphone chips, with its processors at the heart of Apple’s iPhone and Samsung’s Galaxy, is to step down as chief executive after 12 years.

Group president Simon Segars will replace 51-year-old East from July, the British company said on Tuesday.

Since East, an engineer, joined in 1994, ARM has evolved from one processor product line to be the dominant player in mobile computing, providing microprocessors that run nearly all the world’s smartphones, and around a third of all consumer devices.

“After you’ve been doing it for 12 years you do get a bit tired (…) and think ‘Maybe that’s a bit of a brake on the business and somebody else should have a go’,” he told Reuters.

ARM licenses its processor designs to chipmakers including Apple, Samsung, Qualcomm and Texas Instruments. Its low-power processors have enabled it to dominate mobile computing, leaving rival Intel far behind in the sector.

In Cambridge, ARM has been at the heart of the so-called ‘Silicon Fen’, a cluster of high-tech firms at the southern tip of the English Fenland, about an hour’s drive north of London. Founded in 1990, ARM now employs 2,300 people, with 2013 revenues forecast at around $1.03 billion.

“We’ve built a global company based here in the UK, proving it can be done in technology, and I intend to do a bit more of that,” said East, who eschews the casual clothes and colorful style of California’s Silicon Valley in favor of smart suits and a sober manner.

East, whose total pay including share awards and long-term incentives was 7.6 million pounds in 2012, said it was too early to talk about his next move, but that another executive role was unlikely in the short term.

A pound invested in the company’s shares 10 years ago would be worth about 18 pounds now, and the company itself is valued at nearly 13 billion pounds ($19 billion).

INSIDER

Segars, who is 45, has been with ARM for 22 years next week, leading the development of many of its first processors and working in engineering, sales and business development.

He said he did not expect to make any significant changes to company strategy.

“The strategy that we have now I’ve been part of building and believe in very strongly,” he said.

He said ARM would keep growing in mobile computing and beyond, such as in providing technology to connect billions of devices ranging from appliances to vehicles, a concept known as the ‘Internet of Things’.

“We see big opportunities in servers – where we are just really getting started – and likewise in wireless infrastructure, which is going to go through quite radical changes to keep up with all the data that smartphones and the Internet of Things are going to produce and consume,” he said.

Shares in the company were down 2.2 percent at 900 pence by 10.16 a.m. ET, but analysts were comfortable with Segars as East’s successor.

“We do not believe that the choice of Mr Segars or the announcement is a significant surprise, though the timing is slightly earlier than we would have thought,” said UBS analysts.

East was well regarded by investors, but Segars had been effectively running most of the business as executive vice president and general manager of the processor business and was also positively seen in the investment community, they said.

Some 8.7 billion ARM-based chips were shipped last year, up from 420 million when East took over in 2001.

Updated March 19, 2013, 9:59 a.m. ET
ARM Holdings CEO to Retire

LONDON—Warren East, chief executive of ARM Holdings ARM.LN -3.37% PLC, the microchip designer whose technology powers most smartphones including AppleInc.’s AAPL -0.83% iPhone, is to step down after presiding over a 12-year period of dramatic growth.

Mr. East, 51 years old, who joined ARM in 1994 when the company was in its infancy, will hand the reins to ARM President Simon Segars on July 1. He said Tuesday it was time for someone with new energy to see the company through its next phase of growth.

Mr. Segars joined ARM in 1991 and has held several executive roles including executive vice president for engineering, when he worked on many of the early ARM processors.

The Cambridge, U.K.-based company develops patented designs that are licensed to chip makers who then adapt them to their needs by adding their own in-house technology. Chip makers pay ARM an upfront fee to license the design, plus a royalty on every chip shipped.

The company’s specialization in low-cost, low-energy chips has made its technology particularly well suited for mobile devices like smartphones and tablets which run on limited battery power. The company has benefited from the exponential growth of the mobile market over the past few years. And as it has gradually ramped up the processing power of its chips, it is increasingly pushing into new markets like servers, previously the territory of microchip giants such as Intel Corp. INTC -0.05%

“The business is in very good shape, we are facing a fantastic opportunity…in everything from low-powered sensors through to high-end servers and everything in between,” Mr. East told The Wall Street Journal. “From a financial point of view that means the business is doing very well and so we’re in a robust condition to handle this transition.”

The long-term view of the microchip business means that ARM is developing technology that is typically six or seven years ahead of the market, Mr. East said.

“Right now we’re thinking about the sorts of things that are driving growth in 2020 and beyond,” and change is now needed at ARM to push forward that next phase of development, he said. By 2020, he will have been CEO for nearly 20 years and that is too long, he explained.

Mr. Segars, who will clock up 22 years at ARM next week, said he has no plans to change the group’s strategy. “It’s really about getting the team together, making sure that we’re all pointing in the same direction going forwards and continuing to execute on the strategy that we have put together over the last many years now,” he said.

The leadership change surprised investors, who credit Mr. East for ARM’s success over the past decade. Under his tenure, ARM’s share price has risen more than threefold.

“ARM has been tremendously successful under Warren East’s leadership”, Bank of America Merrill Lynch said in a research note to clients. He added that Mr. Segars, 45, is “very well regarded in the technology industry and is ideally suited to assume the CEO role.”

When Mr. East became CEO in 2001, the company had just one processor product line. Now ARM provides the broadest portfolio of technologies in the industry, used by more than 300 semiconductor customers, according to Chairman John Buchanan. Over the same period, ARM’s annual revenue has increased to $913 million from $213 million, while the number of chips shipped per year has risen to 41 billion from 950 million.

Mr. East, who has spent 30 years working in the semiconductor industry, told analysts that he is “looking forward to doing something broader than microprocessors” and said he would stay connected with the technology industry though he didn’t have any immediate plans. He ruled out anything remotely competitive with ARM. A day after stepping down, he will deliver a speech at a wireless conference in Cambridge.

The resignation at the top of ARM comes as Intel, which is hurting from the consumer shift from personal computers toward tablet-style devices and smartphones, continues to seek a successor to CEO Paul Otellini. Mr. Otellini surprised many observers in November by announcing plans to retire in May.

Intel spokesman Chuck Mulloy said: “The process is continuing. The objective is to get someone in place about the time of our annual shareholders meeting in mid-May.”

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About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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