Q4 & FY 2010 Results

ARM HOLDINGS PLC REPORTS RESULTS FOR THE FOURTH QUARTER AND FULL YEAR 2010A presentation of the results will be webcast today at 09:30 GMT at www.arm.com/ir

CAMBRIDGE, UK, 1 February 2011-ARM Holdings plc announces its unaudited financial results for the fourth quarter and full year ended 31 December 2010. ARM continues to gain share as market leaders adopt ARM technology for a broadening range of end-markets, increasing ARM's long-term royalty opportunity

Progress on key growth drivers in Q4

·; Growth in adoption of ARM processor technology

o 35 processor licenses signed for a range of applications including smartphones, mobile computers, servers and smartcards

o Microsoft announced that future generations of Windows operating system will support ARM-based chips

o NVIDIA licensed both Cortex™-A15 and the next-generation ARM architecture for computing markets

o Strong licensing drives a 35% sequential increase in order backlog

·; Growth in mobile applications

o 1.1 billion ARM-processor based chips shipped into mobile devices

·; Growth beyond mobile into consumer electronics and embedded products

o 0.7 billion ARM-processor based chips shipped into everything from smart-meters to solid-state drives

·; Growth in outsourcing of new technology

o Physical IP: Freescale became ARM's first subscription licensee for physical IP at an advanced technology node; and a foundry licensed a royalty-bearing platform of physical IP.

o Graphics: 8 licenses for Mali™, ARM's advanced graphics processor

Warren East, Chief Executive Officer, said:

"ARM continues to sign licenses with influential market leaders in an increasingly digital world, and as the industry chooses ARM technology in a broadening range of electronic products, it further drives our long-term royalty opportunity. The growth in licensing and royalty revenues, throughout 2010, has combined to deliver our highest ever annual revenues, profits and cash generation.

2011 will bring exciting opportunities and challenges as ARM enters competitive new markets and we are well positioned to succeed with leading technology, an innovative business model and a thriving ecosystem of partners."

Outlook

It is generally expected that, after a strong recovery in 2010, the semiconductor industry will see more typical growth levels in 2011. With ARM well positioned to continue to gain share, we expect group dollar revenues for the full-year to be at least in line with market expectations.

1 Includes catch-up PIPD royalties in Q4 2010 of $0.4m (£0.2m) and in Q4 2009 of $0.8m (£0.5m).

1 Includes catch-up PIPD royalties in FY 2010 of $1.8m (£1.1m) and in FY 2009 of $5.0m (£2.6m).

2 Includes catch-up PD royalties in FY 2010 of $9.0m (£6.2m).

Notes

CONTACTS:

Total revenues

Total revenues in Q4 2010 were $179.6 million, up 28% on Q4 2009. Q4 sterling revenues were £113.9 million, up 34% year-on-year. By comparison dollar revenue for the semiconductor industry was up 14% over the equivalent period[1].

Total 2010 full-year revenues were $631.3 million, up 29% on 2009. Full-year sterling revenues were £406.6 million, up 33% on 2009. By comparison dollar revenue for the semiconductor industry was up 23% over the equivalent period[2].

License revenues

Total dollar license revenues in Q4 2010 increased by 46% year-on-year to $65.4m, representing 36% of group revenues. License revenues comprised $53.8 million from PD and $11.6 million from PIPD. 

During Q4, several partners entered into long-term commitments to use ARM technology where the revenue associated with these agreements goes into backlog. The revenue for these agreements will be recognised in future quarters as engineering and delivery milestones are achieved. In addition, two new subscription licenses were signed and a third was renewed during the quarter. As a result, group backlog at the end of the quarter was up about 35% sequentially, and about 75% year-on-year, to a record high.

Full-year dollar license revenues were $208.2 million, up 27% on 2009.

Royalty revenues

Royalties are recognised one quarter in arrears with royalties in Q4 generated from semiconductor unit shipments in Q3. Total dollar royalty revenues in Q4 2010 increased 26% to $93.9 million, representing 52% of group revenues. Royalty revenues comprised $81.9 million for PD and $12.0 million for PIPD. 

PIPD royalties of $12.0 million include $0.4 million of "catch-up" royalties. Underlying royalties for PIPD were up 12% year-on-year to a record high.

Full-year dollar royalty revenues were $335.3 million, up 37% on 2009. Royalty revenues now represent 53% of ARM's total revenues, having grown from less than 40% in 2005. It is expected that royalty revenues will become a greater proportion of Group revenues in the future.

Development Systems and Service revenues

Sales of development systems were $11.6 million in Q4 2010, down 9% on 2009 and representing 7% of group revenues. Service revenues were $8.7 million in Q4 2010, up 12% and representing 5% of group revenues.

Full-year development systems revenues were $55.4 million, up 7% year-on-year. Full-year service revenues were $32.4 million, up 10% on 2009.

Gross margins

Gross margin in Q4 2010, excluding share-based payment costs of £0.7 million, was 94.9%, compared to 94.3% in Q4 2009. 

Full-year gross margin, excluding share-based payment costs of £2.8 million, was 94.3% compared to 92.2% in 2009.

The higher gross margin in 2010 compared to 2009 is due primarily to the higher proportion of royalty and licensing revenue compared to development systems and services revenues.

Operating expenses and operating margin

Normalised Q4 and full-year income statements for 2010 and 2009 are included in notes 6.13 to 6.16 below which reconcile IFRS to the normalised non-IFRS measures referred to in this earnings release.

Normalised operating expenses (excluding acquisition-related, share-based payments and restructuring charges) in Q4 2010 were £61.2 million compared to £56.6 million in Q3 2010 and £48.6 million in Q4 2009. The sequential increase in operating expenses in the fourth quarter is due primarily to higher charges for bonus and commission payments than in Q3, arising from the strong revenue and bookings performance in Q4. 

Normalised operating expenses in Q1 2011 (assuming effective exchange rates similar to current levels) are expected to be £57-59 million. 

Normalised operating margin in Q4 2010 was 41.1%. Normalised operating margin in Q3 2010 and Q4 2009 was 37.7% and 37.3% respectively. Normalised operating margin in the full-year 2010 was 40.4% compared to 31.2% in 2009.

Normalised research and development expenses were £29.6 million in Q4 2010, representing 26% of revenues, compared to £26.4 million in Q3 2010 and £23.9 million in Q4 2009. Normalised sales and marketing costs were £15.9 million in Q4 2010, representing 14% of revenues, compared to £13.3 million in Q3 2010 and £12.7 million in Q4 2009. Normalised general and administrative expenses were £15.7 million in Q4 2010, representing 14% of revenues, compared to £16.9 million in Q3 2010 and £12.0 million in Q4 2009.

Total IFRS operating expenses in Q4 2010 were £73.1 million (Q4 2009: £60.2 million) including £9.9 million (Q4 2009: £7.4 million) in relation to share-based payments and related payroll taxes, and £2.0 million (Q4 2009: £4.2 million) in relation to amortisation of intangible assets, other acquisition-related charges, disposal of investments and restructuring charges. Total share-based payments and related payroll tax charges of £10.6 million in Q4 2010 were included within cost of revenues (£0.7 million), research and development (£6.4 million), sales and marketing (£2.0 million) and general and administrative (£1.5 million).

Total IFRS operating expenses for full-year 2010 were £273.6 million (2009: £233.9 million), including share-based payments and related payroll taxes of £39.1 million (2009: £23.0 million), amortisation of intangible assets, other acquisition charges, disposal of assets and restructuring charges of £11.0 million (2009: £24.8 million), and Linaro™-related charges of £4.5 million (2009: £nil). Excluding these charges, operating expenses for the full year were £219.0 million, compared to £186.2 million in 2009.

Earnings and taxation

Profit before tax was £34.9 million in Q4 2010 compared to £20.1 million in Q4 2009. After adjusting for acquisition-related, share-based payments and restructuring charges, normalised profit before tax was £47.6 million in Q4 2010 compared to £32.3 million in Q4 2009. As a result of increased research and development tax credits and the ability by the Group to recognise US deferred tax assets from prior years due to increased profits arising in the Group's US subsidiary, the Group's effective normalised tax rate in Q4 2010 was 17.3% (IFRS: 14.9%) giving a full year normalised tax rate of 24.5% (IFRS: 21.9%). The tax rate under IFRS is lower than the normalised tax rate due primarily to the impact of tax credits arising on share-based payments. We expect the normalised tax rate for 2011 to be approximately 27%.

In Q4 2010, fully diluted earnings per share prepared under IFRS were 2.19 pence (10.28 cents per ADS[3]) compared to earnings per share of 1.32 pence (6.38 cents per ADS) in Q4 2009. Normalised fully diluted earnings per share in Q4 2010 were 2.90 pence per share (13.61 cents per ADS) compared to 1.79 pence (8.66 cents per ADS) in Q4 2009. 

Full-year 2010 fully diluted earnings per share prepared under IFRS were 6.36 pence compared to earnings per share of 3.11 pence in 2009. Normalised fully diluted earnings per share for 2010 were 9.34 pence per share compared to 5.45 pence per share in 2009.

Balance sheet

Intangible assets at 31 December 2010 were £544.4 million, comprising goodwill of £532.3 million and other intangible assets of £12.1 million, compared to £516.8 million and £24.7 million respectively at 31 December 2009. The regular review of the carrying value of assets arising on acquisition was performed during Q4 2010 and it was concluded that no impairment was required.

Total accounts receivable were £105.7 million at 31 December 2010, comprising £96.8 million of trade receivables and £8.9 million of amounts recoverable on contracts, compared to £70.7 million at 30 September 2010, comprising £56.8 million of trade receivables and £13.9 million of amounts recoverable on contracts.

Days sales outstanding (DSOs) were 41 at 31 December 2010 compared to 41 at 30 September 2010 and 46 at 31 December 2009.

Cash flow and dividend

Total cash (see note 6.6) at 31 December 2010 was £290.1 million compared to £251.9 million at 30 September 2010. Normalised cash generation in Q4 2010 was £40.7 million.

The directors recommend payment of a final dividend in respect of 2010 of 1.74 pence per share, up 20%, which taken together with the interim dividend of 1.16 pence per share paid in October 2010, gives a total dividend in respect of 2010 of 2.90 pence per share, an increase of 20% on the total dividend of 2.42 pence per share in 2009. Subject to shareholder approval, the final dividend will be paid on 18 May 2011 to shareholders on the register on 27 April 2011.

Operating review

Backlog

During Q4 several partners entered into long-term commitments to use ARM technology across many of their product lines. This has led to ARM's highest ever group order backlog at the end of Q4 2010, up about 35% sequentially and about 75% higher than a year ago.

Processor Licensing

A total of 35 processor licenses were signed in Q4. 

ARM processor technology is increasingly being chosen for use across semiconductor companies' product portfolios. In Q4 several leading semiconductor companies licensed ARM processor technology for multiple end-markets:

·; NVIDIA licensed Cortex-A15 for use in mobile computing applications, and they also signed an ARM architecture license to develop a range of computer chips for PCs, workstations, servers and supercomputers

·; A major semiconductor company signed a subscription license for a broad range of ARM processors for deployment across their semiconductor product portfolio

·; CSR licensed Cortex-A9 and Cortex-A5 for in-vehicle and portable navigation device markets

·; Three major semiconductor companies signed agreements providing access to multiple ARM processors for use in a range of applications.

Consumer electronics and embedded devices continue to be a major driver for processor licensing with 19 of the new processor licenses being signed for a range of digital products such as computing, digital TV, microcontrollers, networking, smartcard and solid-state drives. The remaining 16 licenses are initially intended for mobile computers and smartphones.

8 of the licenses were for ARM's advanced Mali graphics processors for use in smartphones, mobile computers and digital TVs. 19 of the licenses were for ARM's Cortex processors, including 8 new licenses where ARM technology is being used by a new customer or in a new product line within an existing customer.

Q4 2010 and Cumulative Processor Licensing Analysis

* Adjusted for licenses that are no longer expected to start generating royalties

In addition, Microsoft announced that future versions of the Microsoft Windows operating system and Microsoft Office software will support low power, system-on-chip platforms from ARM's partners. This announcement builds on the 13 years of technology development by Microsoft together with ARM and the ARM Partnership, and will give computer manufacturers a broader choice of silicon provider, bringing greater differentiation to consumers.

Processor Royalties

Royalties are recognised one quarter in arrears with royalties in Q4 generated from semiconductor unit shipments in Q3. PD royalty revenues in Q4 2010 grew 29% year-on-year. This compares with industry revenues growing by 14% in the shipment period (i.e. Q3 2010 compared to Q3 2009)[4], demonstrating ARM's market share gains over the last 12 months.

Q4 revenue came from the sale of 1.8 billion ARM-processor based chips, the highest ever number of ARM-processor based chip shipments reported in a quarter. 

The Cortex family now represents 13% of units shipped, up from 2% in the same quarter one year ago. This increase is due primarily to Cortex-M series shipments in microcontrollers and wireless networking chips, and Cortex-A series shipments driven by high-end smartphones and mobile computing.

Q4 2010 Processor Royalty Analysis

ARM gained share in non-mobile end-markets throughout 2010. Shipments of ARM-processor based microcontrollers grew over 100% year-on-year, compared to about 45% growth for the overall microcontroller market[5]. This growth was driven by an increase in sales of Cortex-M family based chips which now comprise about 10% of total ARM shipments.

This strong sequential growth in low-cost microcontrollers has resulted in the average royalty rate decreasing to 4.6 cents in the quarter from 4.7 cents in the prior quarter and 4.9 cents in the same quarter last year.

When calculating the number of ARM-processor based chips per mobile handset, ARM has consistently used handset shipment data provided by Gartner Inc. Recently Gartner have restated their mobile handset estimates to better reflect grey-market shipments into emerging markets. ARM will continue to use Gartner's estimates, and below is our chips per handset analysis based on both their original and restated numbers to allow a comparison.

Including an additional 200m low-cost phones into 2010, the average number of ARM-processor based chips per handset[6] is lower, however the trend is unchanged; the rapid growth of smartphones and the introduction of mobile computers, such as tablets, continue to benefit ARM. In Q4 2010 ARM's customers reported about a 30% year-on-year increase in shipments of chips into the mobile segment, driven by a doubling in smartphone shipments. 

In addition, ARM's momentum in mobile computing continued with many leading OEMs announcing mobile computers utilizing ARM technology-based chips

PIPD licensing

Freescale became ARM's first subscription licensee for physical IP at an advanced technology node. This agreement will enable Freescale to deploy ARM's advanced physical IP into chips for a broad range of applications and forms a multi-year commitment from Freescale to leverage ARM's investment in advanced technology. Five other fabless semiconductor companies licensed advanced physical IP technology, at 28nm and 40nm, for use with royalty-bearing foundry platforms. In addition, ARM signed another new physical IP license in Q4 for a royalty-bearing 130nm foundry platform. Each platform contains a wide range of physical IP technology components, typically a mix of standard cell libraries and memories. Cumulatively, 77 physical IP foundry platform licenses have now been signed. This combination of an expanding base of foundry platform licenses for physical IP and the adoption of that technology by major semiconductor vendors drives ARM's future royalty potential.

ARM is seeing increasing demand for physical IP optimised for use with processors, such as the Cortex-A family. These processor optimisation packages (POPs) enable the licensee to more readily achieve a high-performance, low-power processor implementation through specially optimized physical IP technology. For every chip implemented using a POP, ARM receives a royalty both for the processor in the chip and for the physical IP. During the quarter we signed four licenses for POPs for two different advanced ARM Cortex-A cores at 32nm and 40nm nodes, for use in digital TV, gaming, mobile computing and smartphone applications. This brings the total number of POP licenses to 10.

Q4 2010 and Cumulative PIPD Licensing Analysis

Shortly after the end of the quarter, ARM and IBM announced an R&D collaboration that extends the companies' existing technology partnership around advanced processes and physical IP. This agreement enables ARM to develop physical IP and optimised processor implementations through access to IBM's process technology through the 20nm and 14nm nodes. These advanced platforms will form the foundation for future generations of low-power high-performance applications such as mobile computing and consumer electronics.

PIPD royalties

Physical IP royalties are generated mainly from chip wafers manufactured in foundries such as GLOBALFOUNDRIES, TSMC and UMC. Royalties are recognised one quarter in arrears with royalties in Q4 generated from wafer unit shipments in Q3. 

Underlying PIPD royalties in Q4 2010 were $11.6 million, up 12% year-on-year, to a record high. ARM's physical IP royalty revenues from advanced nodes, at 65nm and below, have increased three-fold from Q4 2009 and now contribute 30% of total physical IP royalty revenue.

People

At 31 December 2010, ARM had 1,889 full-time employees, a net increase of 179 since the start of the year. At the end of 2010, the group had 784 employees based in the UK, 505 in the US, 219 in Continental Europe, 276 in India and 105 in the Asia Pacific region.

Principal risks and uncertainties

The principal risks and uncertainties faced by the Group are noted within the Annual Report on Form 20-F for the year ended 31 December 2009 which is on file with the Securities and Exchange Commission (the "SEC") and is available on the SEC's website at www.sec.gov. There have been no changes to these risks that would materially impact the Group in the foreseeable future. These include but are not limited to: ARM's quarterly results may fluctuate significantly and be unpredictable which could adversely affect the market price of ARM ordinary shares; general economic conditions may reduce ARM's revenues and harm its business; ARM may have to protect its intellectual property or defend itself against claims that we have infringed others' proprietary rights; an infringement claim or a significant damages award would adversely impact ARM's operating results; companies within the semiconductor industry may consolidate reducing the number of customers that ARM may sell its technology to; for ARM to enter new markets or develop new technology may require significant investment and may not result in profitable operations; and ARM competes in the intensely competitive semiconductor market.

ARM Holdings plc

Consolidated balance sheet - IFRS

ARM Holdings plc

Consolidated income statement - IFRS

All activities relate to continuing operations. 

All of the profit for the period is attributable to the equity shareholders of the parent.

ARM Holdings plc

Consolidated statement of comprehensive income - IFRS

ARM Holdings plc

Consolidated cash flow statement - IFRS

ARM Holdings plc

Consolidated statement of changes in shareholders' equity - IFRS

Notes to the Financial Information

(1) Basis of preparation

The financial information prepared in accordance with the Group's IFRS accounting policies comprises the consolidated balance sheets as of 31 December 2010 and 31 December 2009, consolidated income statements and consolidated statements of comprehensive income for the three months and years ended 31 December 2010 and 2009, and consolidated cash flow statements and consolidated statements of changes in shareholders' equity for the years ended 31 December 2010 and 2009, together with related notes. This condensed set of consolidated financial information for the year ended 31 December 2010 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, "Interim financial reporting", as adopted by the European Union. This financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2009, which have been prepared in accordance with IFRSs as adopted by the European Union.

The following new standards and amendments to standards are mandatory for the first time in 2010:

·; IFRS 3 (revised), "Business combinations". The revision to this standard continues to apply the acquisition method to business combinations but there are significant changes to the treatment of contingent payments, transaction costs, and the calculation of goodwill. This could impact the Group's financial statements in the future if it makes any further acquisitions.

·; Amendment to IFRS 2, "Share-based payment- group cash-settled share-based payment transactions". This amendment provides a clear basis to determine the classification of share-based payment awards in both consolidated and separate financial statements. This has had no material impact on the Group.

·; IFRS5 (amendment) "Non-current assets held for sale and discontinued operations". This amendment clarifies that IFRS5 specifies the disclosures required in respect of non-current assets classified as held for sale or discontinued operations. This could have an impact on the Group if it holds such assets in the future.

·; IAS 1 (amendment), "Presentation of financial statements". The amendment clarifies that the potential settlement of a liability by the issue of equity is not relevant to its classification as current or non-current. This has had no impact on the Group as it has not had any transactions of this type.

·; IAS 38 (amendment), "Intangible assets". The amendment clarifies guidance in measuring the fair value of an intangible asset acquired in a business combination and permits the grouping of intangible assets as a single asset if each asset has similar useful economic lives. This standard could have an impact on the Group in the event that it makes an acquisition and chooses to adopt this policy.

·; Amendment to IAS 39, "Financial Instruments: Recognition and measurement on eligible hedged items". This amendment makes two significant changes. It prohibits designating inflation as a hedgeable component of a fixed rate debt. It also prohibits including time value in the one-sided hedged risk when designating options as hedges. This has not impacted the Group since it does not currently designate any financial instruments as hedges.

·; IAS 36 (amendment), "Impairment of assets". This amendment clarifies that the largest cash-generating unit (or group of units) to which goodwill should be allocated for the purposes of impairment testing is an operating segment. This has no impact on the Group since it does not aggregate segments for this purpose.

·; Improvements to International Financial Reporting Standards 2009 were issued in April 2009. These improvements have had no material impact on the results of the Group.

The following new standards, amendments to standards, or interpretations are effective in 2010 but not relevant to the Group:

·; IAS 27 (revised), "Consolidated and separate financial statements". This amendment revises the accounting for transactions with non-controlling interests. This is not relevant to the Group as it currently does not have any non-controlling interests.

·; IFRIC 15, "Agreements for construction of real estate". This is not relevant to the Group as it does not have any transactions involving real estate.

·; IFRIC 16, "Hedges of a net investment in a foreign operation". This clarifies the usage and requirements of IAS 21 with respect to net investment hedging. This is not relevant to the Group as it does not undertake such activities.

·; IFRIC 17, "Distributions of non-cash assets to owners". This is not currently relevant to the Group as it does not make non-cash distributions.

·; IFRIC 18, "Transfers of assets from customers". This is not relevant to the Group as it has not received any assets from customers.

·; Amendments to IFRIC 9 and IAS 39, "Embedded derivatives".This amendment allows entities to reclassify particular financial instruments out of the fair value through profit or loss or available for sale categories in specific circumstances. This is not relevant to the Group since it currently does not currently have any transactions that meet the criteria of the amendment.

(2) Share-based payment costs and acquisition-related expenses

Included within the consolidated income statement for the quarter ended 31 December 2010 are total share-based payment costs (including related payroll taxes) of £10.6 million (2009: £8.0 million), allocated £0.7 million (2009: £0.6 million) in cost of revenues, £6.4 million (2009: £4.8 million) in research and development expenses, £2.0 million (2009: £1.5 million) in sales and marketing expenses and £1.5 million (2009: £1.1 million) in general and administrative expenses.

Included within the consolidated income statement for the year ended 31 December 2010 are total share-based payment costs (including related payroll taxes) of £41.9 million (2009: £24.7 million), allocated £2.8 million (2009: £1.7 million) in cost of revenues, £25.2 million (2009: £14.8 million) in research and development expenses, £8.0 million (2009: £4.7 million) in sales and marketing expenses and £5.9 million (2009: £3.5 million) in general and administrative expenses.

Also included within operating expenses for the quarter ended 31 December 2010 is amortisation of intangibles acquired on business combinations of £2.3 million (2009: £3.6 million), allocated £0.7 million (2009: £1.7 million) in research and development expenses and £1.6 million (2009: £1.9 million) in sales and marketing expenses.

Included within operating expenses for the year ended 31 December 2010 is amortisation of intangibles acquired on business combinations of £10.9 million (2009: £15.7 million), allocated £3.5 million (2009: £7.7 million) in research and development expenses and £7.4 million (2009: £8.0 million) in sales and marketing expenses.

(3) Dividends

In respect of the year ended 31 December 2010, the directors are proposing a final dividend of 1.74 pence per share (an estimated cost of £23.0m). It will be paid on 18 May 2011 to shareholders who are on the register of members on 27 April 2011.

(4) Accounts receivable, and accrued and other liabilities

Included within accounts receivable at 31 December 2010 are £8.9 million (31 December 2009: £12.4 million) of amounts recoverable on contracts. Included within accrued and other liabilities at 31 December 2010 are £17.7 million (31 December 2009: £6.2 million) relating to the provision for payroll taxes on share awards, and £22.7 million (31 December 2009: £10.7 million) relating to employee bonus and sales commission provisions.

(5) Segmental reporting

At 31 December 2010, the Group is organised on a worldwide basis into three main business segments:

Processor Division (PD), encompassing those resources that are centred on microprocessor cores, including specific functions such as graphics IP, fabric IP and embedded software and configurable digital signal processing IP.

Physical IP Division (PIPD), concerned with the building blocks necessary for translation of a circuit design into actual silicon.

Systems Design Division (SDD), focused on the tools and models used to create and debug software and system-on-chip (SoC) designs.

This is based upon the Group's internal organisation and management structure and is the primary way in which the Chief Operating Decision Maker is provided with financial information. Whilst revenues are also reported into four main revenue streams (namely licensing, royalties, development systems and services), the costs, operating results and balance sheets are only analysed into these three divisions.

The following analysis is of revenues (in both GBP and USD), operating costs, investment income, interest payable and similar charges, profit/(loss) before tax, tax, profit/(loss) for the year, amortisation of intangible assets and other acquisition related charges, share-based payment costs including employers taxes, restructuring, investment-related charges, goodwill and total assets for each segment and the Group in total.

(5) Segmental reporting (continued)

There are no inter-segment revenues. The results of each segment have been prepared using accounting policies consistent with those of the Group as a whole. Unallocated assets include cash and cash equivalents, short and long-term deposits, available-for-sale investments, loans and receivables, embedded derivatives, current and deferred tax, and VAT. Unallocated operating costs consist of foreign exchange transactions.

 (6) Non-GAAP measures

The following non-GAAP measures, including reconciliations to the IFRS measures, have been used in this earnings release. These measures have been presented as they allow a clearer comparison of operating results that exclude acquisition-related charges, share-based payment costs, restructuring charges, profit on disposal and impairment of available-for-sale investments, and Linaro-related charges. Full reconciliations of Q4 2010, Q4 2009, FY 2010 and FY 2009, are shown in notes 6.13 to 6.16. All figures in £'000 unless otherwise stated.

(6.13) Normalised income statement for Q4 2010

(6.14) Normalised income statement for Q4 2009