LONDON -- U.K. microchip designer ARM Holdings PLC (ARMHY) third-quarter outlook will come under close scrutiny Monday when it reports second-quarter earnings.
The company has already said that first-quarter unit shipments, which are recognized as second-quarter royalties, will fall 20% due to a slowdown in networking and wireless communications.
Although ARM stated that any royalty revenue shortfalls will be compensated by higher licensing income, there are concerns that it could lower guidance for the third quarter.
"We believe that ARM will fall prey to the same license pushouts, which triggered profit warnings by MIPS and ARC, so earnings risk remains high," said analysts at UBS Warburg.
ARC International PLC (U.ARK), a smaller rival of ARM, earlier this month said that delays to licensing contracts will lead to lower-than-expected sales in the second quarter. The news came four days after U.S.-based chip designer MIPS Technologies Inc. (MIPS) blamed a high number of postponements among its customers for disappointing fourth-quarter earnings.
ARM is expected to post a second quarter pretax profit ranging from GBP10.3 million to GBP12.9 million, with sales seen between GBP32.8 million and GBP35.3 million. Earnings per share are pegged between 0.7 pence and 0.9 pence.
Last year the company reported a pretax profit of GBP8.97 million on sales of GBP23 million, while earnings per share came at 0.7 pence.
Other analysts are more positive about the upcoming results, pointing out that ARM's business model is less sensitive to end-market demand for semiconductor products, while it benefits from the R&D budget of its customer base.
"We expect the company to deliver a relatively positive outlook for the third quarter, which we believe should further bolster the share price," said Robertson Stephens analysts, who rate the stock a buy.
At 1354 GMT shares were down 0.5 pence, or 0.2%, at 210 pence.
Company Web site: arm.com |
