ARM 1H revenues grow but profits slip: sees improved conditions in 2H
ARM Holdings plc (ARM.L), leading chip designers, said its dollar revenues grew 11% to $258.4m in the half-year ended 30 June, while pre-tax profit slipped 8% to £44.1m.
The company was affected by seasonal slow down in demand in the semiconductor industry as well as an industry-wide inventory correction, and got no help from the sterling/dollar exchange rate.
CEO Warren East (pictured) said: “We are encouraged to have grown dollar revenues … against a challenging industry backdrop, compared to overall semiconductor industry revenues which grew less than 5%.
“A record quarter for licensing of ARM processor technology in Q2 enhances our prospects for further penetrating mobile and non-mobile markets in the future. In addition, good revenue growth and continued cost discipline have enabled us to increase profitability despite the continued strong currency headwind.
“Overall, ARM is well-positioned to benefit from the generally-anticipated improvement in industry conditions in the second half and we are confident of achieving full-year earnings in line with expectations."
The share price slid almost 3% to 143.5p on the news. ARM is now valued at just over £1.9 billion.
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The Cambridge-based ARM, the largest firm in Silicon Fen by market capitalisation, said the first half of 2007 had seen very strong licensing in the Processor Division, up 25% year-on-year, which will underpin growth in royalty revenues, both in mobile and non-mobile markets.
In the short term, royalty revenues have been impacted by normal seasonality, the industry inventory correction and lower utilisation rates in the foundries.
Reiterating comments in February, it said 2007 is expected to be a year of productivity enhancement and acceleration in operating leverage following a year of high investment in headcount in 2006. Normalised operating margin in Q2 2007 of 32.0% was up from 30.3% in Q1 2007 and 29.0% in Q4 2006, in spite of further weakening of the dollar against sterling.
“We enter the second half of 2007 with a strong order backlog and a healthy licensing sales opportunity pipeline across the business. Further, royalty revenues are expected to benefit from the generally-anticipated improvement in industry conditions in the second half as the impact of the inventory correction reduces, foundry utilisation rates increase and the momentum behind smart phone sales gathers pace. As a result, although the pace of improvement in industry conditions is uncertain, assuming the dollar/sterling exchange rate remains similar to the effective rate reported in Q2 2007, we are confident of achieving full-year earnings in line with expectations,” the company said in a statement to the Stock Exchange.
26th July 2007
