UPDATE 3-Artisan worries dampen ARM Q4, shares fall
Wed Jan 26, 2005 08:45 AM ET
(Adds fresh CFO comment, analyst, more detail, updates shares)
By Santosh Menon
LONDON, Jan 26 (Reuters) - Renewed concerns over UK chip designer ARM Holdings Plc(ARM.L: Quote, Profile, Research) 's recent purchase of Artisan Components amid a slowing semiconductor market sent ARM's shares lower, despite fourth quarter profits that met forecasts.
ARM's shares fell more than 5 percent, shrugging off ARM's assertion that it hoped to grow dollar revenues in both underlying business by at least 20 percent in 2005 despite a flat market.
ARM, whose purchase of Artisan was completed last month, said licence revenues at the U.S.-based firm fell to $7 million during the quarter to Dec. 31, well below analysts' forecasts.
But the company, which develops and licenses designs for chips used in mobile phones and digital cameras, said the drop stemmed from a conscious decision not to convert orders into revenues to enable it to enter 2005 with a better backlog.
"But it still doesn't show up as real numbers, and therefore, is a promise as opposed to reality," said Scott Geels, analyst at Sanford C. Bernstein.
ARM, which announced the acquisition of Artisan for $913 million last August, has in the past faced a tough time convincing investors and analysts on the merits of the deal.
Shares in the company were down 5-3/4 pence at 99p by 1344 GMT. ARM's shares have outperformed its UK technology hardware sector peers by over 5 percent in the past 12 months.
BUCK TREND
Chief Financial Officer Tim Score told reporters that ARM's exposure to consumer electronics end-markets such as 3G mobile phones, Apple iPods, wireless LAN chips and hard disk drives would help it buck the broader industry trend.
He also said that a flat semiconductor market in 2005 did not mean the industry was heading for another crash. "It's a bit of a pause of breath, rather than an entry into a downturn," Score said on a conference call.
The Cambridge-based company, which counts chipmakers such as Texas Instruments (TXN.N: Quote, Profile, Research) and STMicroelectronics (STM.PA: Quote, Profile, Research) as customers, said both it and Artisan had an order backlog that could cover several quarters of licence revenues.
Pretax profit before exceptionals in the three months to Dec. 31 rose to 13.5 million pounds ($25.4 million) from 8.9 million a year earlier and compared with 13.7 million in the preceding quarter.
Revenues rose to 41.5 million pounds from 34 million last year. Analysts on average had forecast a pretax profit of 13.5 million on revenue of 41.4 million. Full year pretax profit was 38.5 million pounds on revenues of 152.9 million.
"A very solid set of results," said Nomura analyst Sean Murphy in a research note.
ARM said its licence revenues, which it receives as one-off payments for the use of its designs, rose to 16.2 million pounds in the quarter from 14.6 million in the preceding three months.
Royalty revenues -- the money it gets each time chipmakers sell a chip designed by it -- rose to 16.3 million pounds from record shipments of 367 million chips, compared with revenues of 16 million from 341 million shipped in the preceding quarter.
Analysts said royalty revenues were impacted by a fall in the average selling prices of the chips sold. |
