* Q2 pretax profit up 30 percent to 86.6 mln stg
* Licensing for processors and graphics beat expectations
* Shares up 4.5 pct
(Adds further CFO comments, analyst reaction, updates shares)
By Paul Sandle
LONDON, July 24 British chip designer ARM
Holdings said it expected continued strong demand for
its technology after higher-than-expected licensing of its
processors in the second quarter.
The Cambridge-based company reported a 30 percent rise in
pretax profit to 86.6 million pounds ($133 million) on
Wednesday, beating forecasts.
ARM has outpaced the wider semiconductor market for the past
five years or so, helped by the use of its processors in
smartphones like Apple's iPhone and tablet computers.
It licenses its designs and receives a royalty on every chip
shipped by its partners.
Chief Executive Simon Segars, who took over as chief
executive from Warren East on July 1, said the firm was
continuing to see strong demand for its latest technology for
both application processors - the brains in mobile devices - and
for graphics technology.
Processor design licensing revenue rose 34 percent
year-on-year to 56.9 million pounds, comfortably beating market
expectations. Analysts at Liberum expected 18.7 percent growth.
Finance Director Tim Score said he did not see any slowdown
in licensing, pointing to a 10 percent increase in the order
backlog. "The underpin for future licence revenue is looking
very strong," he told reporters.
Shares in ARM reached a high of 11.11 pounds in May,
exceeding the level they were trading at in the dot-com boom of
2000. They have since come off by about 20 percent, but were up
4.5 percent at 940 pence by 1048 GMT on Wednesday.
Analysts at Investec, who rate the shares a "buy", said the
highlight of the results was the exceptional licence number,
which it said was due to very strong new signings rather than
orders taken from the backlog.
ARM's partners signed 25 licences for its technology in the
quarter, including five for its latest Cortex-A designs and
seven for its Mali graphics technology.
The company has been increasing its share of the graphics
processing market, and on Tuesday Samsung said it
had selected Mali for its latest high-end processor, ousting
rival Imagination Technologies.
There have been some signs of softness at the top end of the
smartphone market, marked by weaker-than-expected sales of
Samsung's flagship Galaxy S4 smartphone. Apple, however,
comfortably beat forecasts for iPhone sales on Tuesday.
But Score said he expects the smartphone market to remain
strong, although the 50 percent-plus growth rates of recent
years were easing.
ARM does not rely on the top end of the market, he said.
"All smartphones contain more ARM technology than less
sophisticated phones and therefore generate higher royalties."
Royalties from chips shipped by partners, such as Qualcomm
and Texas Instruments, reported a quarter in
arrears, rose 26 percent year-on-year to 77.7 million pounds,
broadly in line with expectations.
ARM reiterated its guidance for full-year revenue to at
least meet market expectations. Score said he expects analysts
revenue forecasts to rise after the second-quarter results, to
about $1.09 billion for the year.
Analysts expected the company to report pretax profit of
82.5 million pounds on revenue of 165 million pounds for the
quarter, according to a company-supplied consensus.
($1 = 0.6508 British pounds)
(Editing by David Holmes and Elaine Hardcastle)