MIPS Technologies Inc. (MIPS) has seen its revenue--and stock price--soar as it benefits from increasing demand for its chip designs, and its chief executive is confident that trend will continue as the company gains traction in the mobile market.

MIPS, which licenses its processor designs to semiconductor companies to make chips for everything from digital televisions to networking products, has benefited from rising demand for electronic devices that connect to the Internet. The company late Monday reported a 50% increase in first-quarter revenue to $22.5 million, sending shares up 33% Tuesday.

The stock has more than tripled this year since Sandeep Vij joined the company as president and chief executive.

MIPS is the market leader in providing processor blueprints for chips to be used for digital-home electronics, such as blu-ray players, cable set-top boxes and digital TVs. Broadcom Corp. (BRCM), which earlier this week posted record third-quarter results and bullish fourth-quarter estimates, is MIPS's biggest customer, contributing about 15% of the company's revenue in the first quarter.

MIPs CEO Vij said the growing complexity of electronic devices--including the ability to connect to the Internet--has been benefiting the company.

"The devices you buy today, you look for more functionality than you did in the past," Vij told Dow Jones Newswires. He added that more complexity means the software load on the processor is greater, resulting in demand for more powerful, multicore processors.

"It's a good trend for us because licensing fees are higher on more advanced, more capable, higher performance processors," Vij said. "Typically our royalty rates are higher there too."

And MIPS is looking toward the mobile space as a future growth driver. While no mobile devices currently run on MIPS-based chips, Vij said MIPS has signed about seven processor contracts for mobile, including a recently announced partnership with Paris-based 4G chip maker Sequans Communications. He expects MIPS-based smartphones to be on the market in the first half of 2011.

While mobile presents a potential high-growth area for MIPS, the company was late to the market and has to compete against entrenched chip designer ARM Holdings PLC (ARMH), the U.K. company whose microchip blueprints are in nearly all phones and tablets, including Apple Inc.'s (AAPL) iPhone and iPad.

And MIPS processors aren't compatible with mobile operating systems like Nokia Corp.'s (NOK) Symbian, one factor that kept it out of the market.

Vij said recent shifts in the market--including to new operating systems like Google Inc.'s (GOOG) Android and to the next-generation mobile broadband network known as Long-Term Evolution, or 4G--could help MIPS gain traction in mobile.

The company moved quickly to be compatible with Android, and Vij said MIPS's strong position in supplying WiFi for networking will help it gain customers looking for baseband chip designs, which process wireless signals coming from base-station towers.

"4G protocols are actually more similar to WiFi than they are to 3G," he said.

He added that MIPS-based chips are as power efficient as those designed by ARM--an important factor for mobile devices. And the company has touted the multithreading capability of MIPS-based chips, which allows a processor core to handle multiple tasks at once.

While it won't be easy to go head-to-head with ARM in mobile, analysts said there's nowhere for MIPS to go but up.

"Sometimes just being a 'me too' when somebody has 100% market share is enough to win some business," Benchmark analyst Gary Mobley said.

-By Shara Tibken, Dow Jones Newswires; 212-416-2189; shara.tibken@dowjones.com
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