ARM Holdings (LSE:ARM)
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2 Years : From Dec 2011 to Dec 2013
Strong consumer appetite for smartphones, tablets and televisions helped U.K. microchip designer ARM Holdings PLC (ARM.LN) deliver a sharp rise in first-quarter revenue and profit.
The company, which produces designs for microchips that power most mobile phones, including Apple Inc.'s (AAPL) iPhones and iPads, as well as household goods and cars, said net profit jumped 74% to GBP37.4 million in the three months ended March 31 from GBP21.5 million a year earlier, helped by a 14% rise in revenue to GBP132.5 million
Strong sales of digital devices led to 1.9 billion ARM-designed chips being shipped in the first-quarter of 2012 from 1.85 billion a year earlier. Around 1.1 billion chips were used in mobile phones and mobile computers, similar to last year. Another 800 million chips were used in products such as cars, washing machines and dishwashers, up 15% on year.
"As many aspects of our lives become digital, we continue to see an increase in the demand for ARM's smarter and lower power technology, which is driving both our licensing and royalty revenues," Chief Executive Warren East said.
Chief Financial Officer Tim Score said the first quarter represents a "strong start to the year" for the Cambridge-based-company, which outperformed the broader semi-conductor industry.
Revenue from licensing its processors to chip makers was particularly strong in the first quarter, up 27% from a year ago, he said. The company signed 22 processor licenses in the period.
A slower-than-expected 6% rise in royalties revenue disappointed some analysts, however. The company blamed a slowdown in sales of hard disk drives after manufacturers in Thailand had their production disrupted by floods.
The shortfall hit the company's stock price. At 0943 GMT, ARM shares were down 20 pence, or 3.4%, at 547 pence in a higher London market. The stock has fallen around 9% since January on concerns about the industry's outlook.
Nevertheless, Investec Securities analysts Julian Yates and James Goodman were upbeat, saying good process is continuing at the company and that any weakness on the back of the lower royalty numbers provides a "good buying opportunity." Investec has a buy rating on ARM and 800 pence target price.
Revenue in dollar terms, a figure closely watched by U.K. analysts as the company generates the bulk of its sales in dollars, rose 13% to $209.4 million in the first quarter.
Analysts expect the semiconductor industry to recover in the second half, and ARM forecasts group revenue for 2012 will be in line with current market expectations of $860 million.
Financial chief Score told reporters that the regulatory approval for its proposed joint venture with two European companies, Gemalto NV (GTO.FR) and Giesecke & Devrient GmbH, to improve security for online financial transactions on mobile phones and game consoles, is expected to be approved before the end of June.
The new joint-venture company will provide software that integrates closely with ARM-based chips, sitting underneath the operating system and closer to the silicon to make the device more secure.
-By Lilly Vitorovich, Dow Jones Newswires; 44-0-207 842 9290; email@example.com