UPDATE - Chip designer ARM takes Q2 hit, sees rebound
Tuesday July 22, 7:12 am ET
By Santosh Menon
(adds CEO, FD comments, more details, shares)
LONDON, July 22 (Reuters) - British chip designer ARM Holdings Plc (London:ARM.L - News) said on Tuesday it hoped revenues would rebound next year even as second quarter profits fell nearly 60 percent, hit by a semiconductor industry slump.
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ARM, which develops and licenses chip designs used in mobile phones, digital cameras and automobiles, said it expects the pain it has endured to persist a little longer with second-half revenues seen similar to the first.
Shares had dropped nearly four percent to 74-3/4 pence by midday, off a session low of 72-1/4p and compared with a slight increase in the FTSE-100 blue-chip index.
But ARM's Chief Financial Officer Tim Score told reporters that the firm hoped to end 2003 with an order backlog higher than at the start of the year, signalling an improvement next year.
"That's the first time we have had the confidence to talk about the backlog going up for 18 months now," Score said.
ARM, whose customers include chipmakers such as Texas Instruments (NYSE:TXN - News), Intel (NasdaqNM:INTC - News) and Motorola (NYSE:MOT - News), said talks it was in with prospective customers left it confident of having a robust order pipeline at the end of 2003.
The company reported pre-tax profits for the second quarter to June 30 of 6.6 million pounds ($10.5 million) against 16.2 million last year. Revenues fell to 31.4 million pounds from 43.17 million last year.
But the figures still beat analysts forecasts of pre-tax profit at around six million pounds. First-half pre-tax profits stood at 12.6 million pounds on revenues of 62.4 million, down 27 percent.
The firm said quarterly profits and revenues had grown on a sequential basis -- the first time in four quarters.
The semiconductor sector has had a torrid time for the past three years as demand for microchips fell following the steep downturn in the technology and telecoms sectors.
ARM's Chief Executive Warren East said there were some signs things were turning around with volumes picking up, although pricing was not getting any better.
German chipmaker Infineon (XETRA:IFXGn.DE - News) said on Tuesday it was seeing the first signs of a positive market trend, echoing comments made by Texas Instruments a day earlier. ARM, which has cut jobs and costs to counter the downturn, said licensing revenues rose five percent in the second quarter as it signed 11 new licences against eight in first quarter.
Growth in royalty revenues -- the money the firm gets from chipmakers each time they sell an ARM-designed chip -- was flat in the second quarter.
ARM said the royalty revenue stream would take a hit during the second half from the SARS virus that swept through parts of Asia forcing inventory pile ups.
It reported record ARM-based product shipments of 180 million units in the second quarter, with much of the boost coming from digital cameras and printers. |
