ARM reports sales, profits up in Q2

LONDON – Processor intellectual property licensor ARM Holdings plc reported increased sales and profits in its second quarter financial results. The company said it would increase its dividend by 20 percent and observed that it had increased market share in all its target markets.

Total dollar revenues in the second quarter of 2010 were $150.3 million, up 42 percent on Q2 2009, including a processor division catch-up payment of $9.0 million (about £6.2 million). The sterling revenues were £100.0 million, up 54 percent year-on-year. The half-year dollar revenues in 2010 amounted to $293.6 million, up 30 percent on H1 2009.

The profit before tax was £29.6 million (about $46 million) in Q2 2010 compared to £6.4 million (about $9.9 million) in Q2 2009. After adjusting for acquisition-related, share-based payment costs, Linaro-related charges and restructuring charges, normalized profit before tax was £43.5 million (about $67.5 million) in Q2 2010 compared to £16.3 million (about $25 million) in Q2 2009.

"Freescale, Microsoft and TSMC all recently announced adoption of ARM’s latest technology which will further increase ARM’s market penetration, and royalty potential, in a broadening range of end applications," said Warren East, ARM CEO, in a statement. "ARM continued to gain share in the quarter with shipments of ARM-based chips growing faster than the industry in all target markets." East was cautious about the outlook saying that broader macroeconomic environment on end consumer demand later in the year remains uncertain.

In Q2 2010 total dollar license revenues increased by 22 percent year-on-year to $47.0 million, representing 31 percent of group revenues. License revenues comprised $36.6 million from processor division and $10.4 million from the physical IP division.

Total dollar royalty revenues in Q2 2010 increased by 67 percent to $82.3 million, representing 55 percent of group revenues. Royalty revenues comprised $72.5 million from processor and $9.8 million from physical IP.

The processor royalty revenues were boosted by a catch-up payment identified by the customer as part of ARM’s ongoing royalty auditing process. Even without the catch-up payment processor royalties increased faster than market shipments – 54 percent compared with 40 percent – equating to a gain in market share.

The group order backlog at the end of Q2 2010 is up more than 20 percent sequentially creating ARM's highest ever backlog. This is driven partly by strategic deals such as the multi-year architecture license signed with Microsoft and licenses signed with lead-customers for the Eagle processor.

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