ARM Q2 Profit Falls On Expenses, Revenues Up 26%

(RTTNews) - Chipmaker ARM Holdings Plc (ARMH, ARM.L) Wednesday reported a sharp decline in second-quarter profit, as operating expenses climbed, despite 26 percent growth in revenues. The company said it is entering the second half with a record order backlog, and expects overall Group dollar revenues for full year 2013 to be at least in line with market expectations.

Simon Segars, chief executive officer of the company said, "We continue to see demand for ARM's next generation technology, and in Q2 we signed five licenses for Cortex-A series processors, and seven licenses for ARM's Mali graphics processor, demonstrating our leadership in both low-power processor and 3D graphics technology."

ARM noted that during the quarter, its processor royalty revenue again outperformed the semiconductor industry, with an year-over-year growth of 24 percent, partly driven by growth in smartphones and mobile computing.

Total operating expenses advanced to 148.2 million pounds from 77.3 million pounds in the prior year, with an increase in research and development as well as sales and marketing expenses. The firm incurred 41.8 million in costs, being its contribution to a full and final settlement of certain patent related litigation.

Shipments of chips based on ARM processor technology improved 20 percent from last year.

For the second quarter, the company posted profit before tax of 15.0 million pounds, sharply down from last year's 54.8 million pounds. The results are on an IFRS basis.

After adjusting for certain items, normalized pre-tax profit climbed to 86.6 million pounds from 66.5 million pounds a year ago. Adjustments included acquisition-related and share-based payment costs, IP indemnity and similar charges, Linaro-related charges and share of results in joint venture and disposal and impairment of investments.

On a per share basis, earnings were 0.8 pence, down from 2.8 pence per share a year ago. Normalized earnings increased to 4.89 pence from 3.58 pence a year earlier.

Revenues for the quarter grew 26 percent to 171.2 million pounds from 135.5 million pounds a year ago. Revenues were up 24 percent in Dollar terms to $264.3 million.

Total Processor Division, or PD revenues climbed 29 percent to 134.6 million pounds, with a 34 percent increase in Licensing revenues and a 26 percent improvement in Royalties revenues.

The board has also declared an interim dividend of 2.1 pence per share for 2013, up 26 percent from last year, to shareholders of record on September 6, 2013, payable on October 4.

In London, ARM shares are currently trading at 923.5 pence, up 25.5 pence or 2.84 percent, on a volume of 2.06 million shares.