Some conference call comments on results and outlook:
LONDON (AFX) - ARM Holdings PLC said it has seen no slowdown in spending on
research and development among its customers, including mobile phone makers. "Everybody's doom and gloom about wireless, but the market is still
growing," chief financial officer Jonathan Brooks told a conference call to
journalists. "We have not seen any of our customers slowing down core R&D activities, so
ARM seems insulated to some extent from the market dynamics." Recent concerns around ARM had centred on slowing growth in the mobile
handset market, with customers Marconi and Nokia both cautioning on sales.
Reports of excess inventory in the supply channels also led some analysts to see
pressure on shipments and royalty revenues. Despite these concerns, Brooks said he was comfortable with forecasts for
the next two quarters. "We see a lot of people saying there's going to be a downturn. All we can
say is, at the moment, we don't see a particular downturn for our business," he
said. "We generally have two quarters of visibility, and we've had two quarters of
visibility for some time, so we feel comfortable to comment on that. Beyond
then, it's too difficult to judge." Brooks said demand had remained firm because customers increased spending on
the development of new products, to try and offset any slowdown which was caused
by the commoditization of existing offerings. ARM today reported fourth-quarter pretax profit up 53 pct year-on-year to
10.1 mln stg, with revenues up 58 pct to 29.8 mln stg -- above analysts'
forecasts. Of total revenues, just over a quarter came from royalties, with around half
of that coming from wireless activities. Brooks said it does not expect this
ratio to change in the medium term. "Fundamentally we are a company that develops new technology and licences it
... we always see licensing as an important share of total revenues, we don't
really see royalties becoming the lion's share for a long time -- in fact we
can't actually see it," he commented. ARM said long-term margins were sustainable despite the focus on licensing
revenues, through the close management of R&D spending. He also dismissed fears that margin pressure in the mobile market would feed
down to ARM's figures. "The amount of our revenues that are sensitive to mobile phone margins is
not that great, so I don't think it will necessarily feed through to us," Brooks
said. ARM was also confident over the company's landmark licensing agreement with
rival chip designer Motorola, which will see ARM's semiconductor cores offered
to Motorola customers. Concerns had been raised after Motorola cancelled several development
contracts and slashed earnings growth forecasts in its semiconductor operations,
just weeks after signing the ARM deal. "Maybe Motorola should have licensed ARM a lot earlier, and they wouldn't be
finding things so hard," Brooks quipped. "But they're a semiconductor company in a cyclical industry. We're not a
semiconductor company, we're an intellectual property company, so to some extent
we are protected from the big cycles." |
