* Q4 pretax profit 80 mln pounds vs 75.6 mln forecast
* 2013 revenue will be at least in line with expectations
* Royalties up 19 percent to $136.8 million
* Licensing revenue up 28 percent to $100.6 million
* Shares rise to 12-year high
(Adds further analyst reaction, detail)
By Paul Sandle
LONDON, Feb 5 British chip designer ARM
topped expectations for quarterly profit growth as it rode the
wave of soaring sales of smartphones and tablets, most of which
contain its technology.
Shares in the Cambridge, eastern England-based group, up 51
percent in the last 12 months, rose to a 12-year high as
analysts said its positive outlook would trigger upgrades to
their earnings forecasts of between 5 and 6 percent for 2013.
ARM Holdings Plc, which posted a higher-than-expected 16
percent rise in pretax profit, licenses its technology to chip
makers and receives a royalty on each chip shipped in devices
from the likes of Apple Inc and Samsung Electronics Co
Consumers around the world are increasingly accessing the
Internet on mobile devices rather than on PCs - a trend which is
playing to ARM's strengths.
"Five years ago an ARM processor could be found in just over
a quarter of devices that you could use to browse the Internet,"
Chief Financial Officer Tim Score told reporters on Tuesday.
"Last year ... three quarters of Internet-connected screens and
devices used an ARM processor in the main chip."
The newest smartphones and tablets typically contain
multiple ARM-based processors and increasingly ARM graphics as
well, helping lift the company's quarterly royalties 19 percent
to $136.8 million, strongly outperforming the market.
The company recognises royalties a quarter in arrears, so
the royalty income was on the basis of 2.5 billion chips shipped
in the third quarter of the year.
Licensing revenue rose 28 percent to $100.6 million, with 15
licences of a total 36 signed for ARM's most recently introduced
Cortex-A processors designed for mobile computing, servers and
Shipments of Cortex-A technology, which commands a higher
royalty than earlier designs, doubled in the year, the company
said, helping the average royalty rate per chip rise to 4.8
cents from 4.5 cents a year ago.
Analyst Lee Simpson at brokerage Jefferies said demand for
ARM's latest technology was a highlight in a statement that
would drive 5 to 6 percent upgrades to earnings forecasts.
"It underlines that Cortex A is motoring," Simpson said.
"Licensing still remains strong, so interest in the leading edge
is still there. Opex (operating expenses or the group's costs)
has gone up a little bit, but you are still getting the
earnings. Nothing feels broken at this point."
Julian Yates at Investec said ARM had proved yet again it
was the standout play in the technology sector. "The upside beat
on the licence performance should be enough to help the stock
consolidate following its very strong run," he said.
Shares in ARM, which have outperformed the European tech
sector by 20 percent in the last 12 months, were trading
4 percent higher at 928 pence by 0958 GMT, topping the FTSE 100
leader board at that time.
ARM said it expected to continue to outperform the wider
semiconductor market in 2013 and would at least meet analyst
forecasts for 2013 revenue. Score said these had stood at $1.03
The group reported a quarterly pretax profit of 80 million
pounds ($125.9 million) on revenue of 164.2 million pounds,
equating to earnings per share of 4.08 pence. Analysts were
expecting pretax of 75.6 million on revenue of 152.2 million.
ARM said it would raise its final dividend by 35 percent to
2.83 pence a share, resulting in a total payout of 4.5 pence for
the year, up from 3.48p.
($1 = 0.6354 British pounds)
(Editing by David Goodman and David Holmes)