UPDATE: Arm Hldgs 4Q Pfts Rise; Sees 05 Rev Growth
DOW JONES NEWSWIRES
January 26, 2005 6:02 a.m.
By Steve McGrath Of DOW JONES NEWSWIRES
LONDON -- ARM Holdings PLC (ARMHY) Wednesday posted strong fourth-quarter results and said it expects double-digit revenue growth in 2005 despite a challenging market for semiconductor companies.
"Against a likely flatter trading environment in our industry, we expect dollar revenues in the underlying businesses to grow by at least 20% in 2005," the U.K. semiconductor technology company's Chief Executive Warren East said in a statement.
ARM said current expectations for the semiconductor industry in 2005 are for little or no growth after strong growth in 2004. Semiconductor makers such as Infineon Technologies AG (IFX) and STMicroelectronics NV (STM) have already trimmed their expectations for this year.
"Even though the cycle has topped out for (semiconductor) device makers, ARM makes its money through research and development budgets," said a Nomura analyst. "New product designs are being pursued very aggressively" and this will allow ARM to meet its target, he said. Nomura has a buy rating on the stock.
But in a research note, Altium Securities said it isn't as confident as management in the 20% growth target. "ARM is still heavily dependent on the handset market, which is expected to slow considerably this year." Altium has a hold rating on the stock.
On a conference call, ARM Chief Financial Officer Tim Score said royalties from non-wireless devices, such as digital cameras, were growing strongly in line with overall royalties, but that they remained stable at about a third of the total.
At 1100 GMT, ARM's shares were trading down 1 pence, or 1%, at 103.75p in a slightly higher market.
ARM, which designs microprocessors that power consumer devices such as mobile phones, digital cameras and handheld music players which download music, said it will start realizing in 2005 the benefits of its takeover of U.S.-based Artisan, which completed Dec. 23.
Around 45% of the group's cost base will now be in dollars, compared to 25% prior to the deal, while it will continue to generate over 90% of revenues in dollars. This will give it greater protection against dollar weakness, CFO Score said.
Both ARM and Artisan start the year with healthy order backlogs and sales pipelines which will underpin licensing revenues, the company said. "In addition, both companies continue to enjoy good momentum in royalty revenues," it added.
In a research note, JP Morgan said Artisan's fourth-quarter revenues, at $15 million, down 40% on the third quarter, came in below analysts' expectations. However, ARM said Artisan had decided to carry forward as much backlog as possible into 2005 rather than booking it as revenues.
ARM posted fourth-quarter pre-items pretax profit of GBP13.5 million, up from GBP8.9 million a year-earlier on revenues of GBP41.5 million, up from GBP34 million. The figures were in line with analysts' expectations.
Licensing revenues rose to GBP16.2 million in the fourth quarter, from GBP14.2 million in the third quarter. The company signed 19 licenses for microprocessor cores in the quarter, compared with 12 in the third quarter. It added four new license partners.
The company said a total of 65 licenses were signed in 2004, up from 51 licesnes in 2003. It sold 15 licenses for ARM11 products, its newest product range.
Royalty revenues rose to GBP16.3 million from GBP16 million on record shipments of 367 million units in the fourth quarter.
The Nomura analyst noted a swing from royalties towards income from licenses and said it is likely a positive development. "ARM is continuing to win customers with new and old products," he said.
The company said strong bookings drove its order backlog around 30% higher at the end of 2004 compared with the end of 2003. The figure excludes Artisan's order backlog.
Company Web site: arm.com
-By Steve McGrath, Dow Jones Newswires; 44-20-78429284; steve.mcgrath@dowjones.com |
