ARM sees Q3 profit slide despite record unit shipments
By John Walko, EE Times
October 27, 2003
URL: eetimes.com
London - Despite what it says were record unit shipments in its third quarter, ended Sept. 30, ARM Holdings plc saw earnings slide about $1.7 million for this year's quarter from the third quarter of 2002. Revenue was up only marginally from this year's second quarter and down from last year's third. And the company's chairman said last week that its outlook for licensing revenue would be uncertain for the immediate future.
ARM recorded a profit of British Sterling 4.8 million, or about $8.1 million, for the quarter-down from about $9.8 million in third-quarter 2002-on revenue of British Sterling 31.7 million (about $53 million). That revenue figure was up marginally from the second quarter's British Sterling 31.4 million (about $52.4 million).
Royalty revenue from chip designs increased to British Sterling 11.0 million (about $18.4 million) from the second quarter's British Sterling 10.2 million-again, a marginal rise. But third-quarter shipments, at 188 million units, were up 52 percent from the same quarter a year ago. Five new partners commenced shipping in the quarter, ARM said.
Third-quarter revenue from licenses also crept up sequentially, to British Sterling 13.1 million (about $22 million) from British Sterling 12.7 million in the second quarter. The company said that 16 licenses for microprocessor cores were signed in the quarter, compared with 11 in the second quarter, and that seven new partners were signed.
"We did better than many expected, and it is a sound set of results," ARM chairman Robin Saxby told EE Times. "The uptick in licensing activity is encouraging in view of the downturn in the industry.
"But we remain cautious on the outlook for the next quarter. We know partners are eager to do further deals, but the exact timing remains unclear."
Saxby said he was "particularly excited about the prospects for the TrustZone security technology that we have started introducing on the latest ARM11 cores. If we get this right and implement this security feature well, it will open up a whole new revenue stream for our partners and the mobile sector in general, and we will be able to work closely with the operators as well in the future. That will open up a whole new business opportunity for us."
But continuing legal battles loom. Saxby welcomed the recent provisional ruling in the United States in a suit brought against ARM by Nazomi Communications Inc. The court ruled that the current commercial design of the ARM Jazelle technology does not infringe Nazomi's patent.
Saxby warned, however, that more patent litigation cases are probably inevitable, "since we have now reached a certain size. It's the nature of the beast."
The statement accompanying the third-quarter results also notes that ARM's patent infringement dispute with PicoTurbo Inc., thought to have been settled two years ago, persists.
ARM had reached an out-of-court settlement in December 2001 with PicoTurbo, which had tried to sell processors based on the ARM instruction set. The financial details of the settlement were kept confidential at the time, but the few details that were disclosed appeared to favor ARM.
According to Tim Score, ARM's chief financial officer, ARM paid $11 million at the time as the first part of the out-of-court settlement.
The second part of the settlement was divulged in ARM's third-quarter financial statement. According to that document, ARM had agreed to invest in or otherwise pay the sum of $3.025 million in cash to the fabless semiconductor company that PicoTurbo's shareholders planned to set up to sell ARM microprocessor cores under license. ARM states that the sum had been disclosed as a contingent liability in ARM's 2001 and 2002 statutory accounts.
ARM also states it had expected that PicoTurbo's successor entity, called Herodion, would be incorporated and would commence operations during 2002 following the establishment of a business plan and the signing of a satisfactory agreement that would protect the value of ARM's investment.
ARM says that it has not received the relevant documentation but that Herodion still wants to be paid the $3.025 million that's owed PicoTurbo.
The ARM statement says that Herodion is claiming that ARM breached the December 2001 settlement agreement. Herodion is seeking damages, including compensation for the loss of license revenue and royalty payments, according to ARM.
ARM and Herodion have submitted their dispute to arbitration in California, and mediation is slated for the fourth quarter. ARM states in its report that it will consider settling the dispute if appropriate terms can be hammered out.
- Peter Clarke contributed to this story. |
