4th Feb 2014 12:54
LONDON (Alliance News) - ARM Holdings PLC Tuesday said it expects dollar revenues for the full year 2014 to be in line with expectations, assuming the outlook for the semiconductor industry improves as generally anticipated, as it reported a decline in pretax profit for 2013 due to exceptional costs.
ARM saw an exceptional impairment charge of GBP59.5 million for the year ended December 31, 2013, as well as indemnification, settlement and licence costs of GBP41.8 million. Additionally, the company acquired Geomerics Ltd for GBP13.4 million and Sensinode Oy for USD11.7 million in the period.
As a result of these costs, according to international financial reporting standards, ARM saw pretax profit for the year decline to GBP162.6 million from GBP221.0 million in the previous year.
Excluding the exceptional costs, pretax profit for the year was GBP364.0 million, up from GBP276.5 million in the previous year.
The company posted revenue in its fourth quarter of GBP189.1 million, up from GBP164.2 million in the previous year. That brought ARM's full year revenue to GBP714.6 million, up from GBP576.9 million in the previous year.
ARM said its processor royalty revenue grew faster than the overall semiconductor industry. However it said this outperformance was hampered by slower sales of chips for high-end smartphones such as the Apple iPhone, in the second half of the year.
Royalty revenues for the full year rose to USD558.9 million from USD473.9 million, an 18% increase. In the fourth quarter royalty revenues rose to USD146.4 million from USD136.8 million, a 7.0% increase.
Despite this slower growth in high-end smartphones, ARM said it expects its full year 2014 processor royalty revenues to grow at a similar rate to that reported over the last three years.
ARM announced a final dividend of 3.6 pence, bringing the total dividend for the year to 5.7 pence, up 27% from 4.5 pence in the previous year. The company expressed its intention for a limited share buyback programme to maintain a flat share count, it said.
ARM expressed confidence for its future, saying it had made good progress in the fourth quarter as its latest technology was chosen by companies in its target markets, and it signed further licenses for its ARMv8-A processors, Mali graphics processors and physical intellectual property technology.
Although ARM's fourth quarter revenue beat analyst's consensus forecasts provided by the company, pretax profit and earnings per share came in below expectations. Analyst's expected pretax profit of GBP96.9 million, with earnings per share of 5.5 pence for the quarter. ARM posted pretax profit of GBP95.5 million and earnings per share of 5.3 pence.
The company said it had shipped 2.9 billion ARM-based chips despite the smartphone slump. However, ARM said its average royalty per chip in the fourth quarter was 4.5 cents, down from 4.8 cents in the previous year, as it moved its products towards lower priced microcontrollers and smartcards.
Its average royalty price per chip for the full year was 4.8 cents, flat on 2012.
The slow down of high-end smart phones has come into focus following profit warnings from Samsung Electronics Co. Ltd and HTC Corporation in January. Apple Inc posted first quarter results ahead of consensus estimates, but its second quarter revenue forecasts fell below analyst expectations.
Liberum reiterated its 'Sell' rating on ARM following the results, saying that it expects "processor royalty trends to continue to be weak as the smartphone and tablet markets continue to slow down further." Liberum also noted this slowdown was amplified by on-going market share losses to Intel Corp in tablets.
Although the company saw licensing revenues ahead of expectations, Liberum said it expects growth in licensing to "gradually decline to a high single digit rate."
"It remains to be seen how long licensing can compensate for this slowdown given a slight decline in the fourth quarter licensing backlog," said Liberum.
In a call with the press Tuesday morning ARM Holdings Chief Financial Officer Tim Score agreed that whilst there is a slow down of growth in the high-end smartphone market, the company's total shipments were moving towards non-mobile products. Score expects the trend towards non-mobile to continue, and said that in time he expected non-mobile to make up two thirds of its total shipments.
Shares in ARM were trading down 5.0% at 883.45 pence Tuesday afternoon, making them the biggest FTSE 100 fallers.
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews
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