Strong performance by ARM Holdings impresses the market
Silicon Fen's largest quoted company, chipmaker ARM Holdings, which has a market capitalisation of £1.8 billion, reported results for the financial year to end December 2005 at the top end of analysts' expectations.
It said 'normalised' pre-tax profits rose 69% to £81.3m and that it was confident of another "strong performance" this year. Normalised figures were before charges related to its 2004 acquisition of US-based Artisan. The new subsidiary contributed £8m of licence revenues totalling £25.7m in the last quarter of 2005.
Shortly after the results were released broker Morgan Stanley reiterated its 'overweight' advice on the share and lifted its price target to 140p from 127p, while Merrill Lynch reiterated its 'buy' recommendation and raised its own target to 150p. The share price closed at 132.5p on Tuesday. All told, five brokers rate the stock as a 'strong buy'.
Chief Financial Officer Tim Score said the company has "grown revenues at twice the rate of the semiconductor industry, achieved operating margins healthily in excess of 30% and seen volumes of ARM Powered products grow by more than 30% year-on-year to 1.66 billion units.
"Notwithstanding the 20% increase in R&D expenditure to drive expected strong revenue growth, a 24% increase in earnings per share has enabled us to return more cash to shareholders via our progressive dividend policy and the ongoing share buyback program that we introduced during the year."
Chief Executive Warren East said ARM "enters 2006 well placed to build on our market-leading position.
"Q4 was an excellent quarter for our processor division with our new flagship Cortex(R)-A8 product winning four high-profile industry awards and initial deliveries of the next two Cortex products being made to lead partners.
"These innovative products underpin license revenues in 2006. We have also made substantial progress in positioning the combination of physical IP and processor IP in order to realise the anticipated financial and technological benefits in 2006 and beyond."
