ARM Holdings results hit by weak dollar; share price sheds 12%: but has high order backlog
Chip designers ARM Holdings plc (ARM.L, ARMHY) said that 2007 full year revenues were down 2% on 2006 at £259.2m, though measured in US dollars they had increased 6% to $514.3m.
In 2007 the pound was worth $1.98 compared to $1.84 in 2006. If the exchange rate had not changed, sterling revenue would have been 8% higher at £279.9m, the company said.
Pre-tax profit was down 15% at £48.2m, more than the impact of the exchange rate, as margins slipped a bit furing the year.
The stock market reacted badly to the news, with the share price down 12.7% or 15p to 103p in morning trading. It’s the second quarter in a row that the Silicon Fen icon hasn’t met market forecasts. It now has a market capitalisation of about £1.36 billion.
Bit it also said it entered the new year with its highest ever level of order backlog.
CEO Warren East (pictured) said: “In the current uncertain macroeconomic environment, and at this early stage in the year, we remain cautious on the outlook for the semiconductor industry for 2008.
“Within ARM, we have continued to build on our market-leading position and consequently we enter 2008 with the group order backlog at its highest ever level, the physical IP business better positioned to capitalise on the long-term growth opportunity and good royalty revenue momentum based on the continuing proliferation of ARM technology into an ever-broader range of digital devices.
“Given this combination of a well-positioned business operating within uncertain industry conditions, we expect dollar revenues in Q1 2008 to be broadly similar to Q4 2007 levels.
“Assuming no marked deterioration in the trading environment, we expect to increase dollar revenues in FY 2008 by at least the growth rate achieved in 2007. With the operating leverage inherent in ARM's business model, driven primarily by growth in high-margin royalty revenues, we expect constant currency earnings growth in FY 2008 to be significantly higher than revenue growth.”
5th February 2008
