Sunday, January 30, 2011

ARM Holdings plc (NASDAQ: ARMH): Q4 Earnings Preview 2010

ARM Holdings plc (NASDAQ: ARMH) is scheduled to release fourth-quarter earnings before the market open on Tuesday, February 1, 2011. Analysts, on average, expect the company to report earnings of 10 cents per share on revenue of $161.43 million. In the year-ago period, the company reported earnings of 9 cents per share on revenue of $140.02 million.

ARM Holdings plc designs microprocessors, physical intellectual property (IP), and related technology and software, as well as sells development tools to enhance the performance of high-volume embedded applications.

In the preceding third quarter, the Cambridge, United Kingdom-based company's net income, on IFRS basis, was GBP 14.80 million ($23.37 million) or 1.09 pence per share, compared to GBP 6.89 million or 0.53 pence per share last year. Earnings per American Depository shares, or ADS, were 5.16 US cents, higher than prior year's 2.54 US cents in the prior year quarter. Excluding certain charges, normalized profit grew to GBP 28.13 million from GBP 17.46 million a year ago. On a normalized per share basis, earnings climbed 55% to 2.08 pence from 1.34 pence in 2009, and earnings per ADS went up to 9.82 cents from 6.44 cents a year ago. Revenues for the quarter grew 34% to GBP 100.35 million from GBP 75.16 million a year ago. In US dollar terms, revenue growth was 29% to $158.1 million from $123 million last year. Analysts, on average, expected the company to report earnings of  9 cents per share on revenue of $146.98 million.

At its last earnings call in October, the company noted that it enters the final quarter of 2010 with positive momentum, and expects sequential group dollar revenue growth in the fourth quarter. Prospects for backlog in the fourth quarter remain promising, based on the revenue recognition profile of recent deals and the mix of potential deals in the opportunity pipeline, the company added. Despite an uncertain macro-economic environment, ARM said it remains well positioned for growth with leading semiconductor companies increasingly adopting ARM technology for a broadening range of end-markets.

Recently, Microsoft (NASDAQ: MSFT) confirmed that its new smartphones and tablet computers will use the British company's architecture. Microsoft said that it will launch a version of its Windows operating system using ARM chips which would be compatible with smartphones and tablets. The Microsoft move marks a shift from its long-term alliance with chipmaker Intel Corp (NASDAQ: INTC), whose chips have been the mainstay of Windows operating systems on personal computers. High-powered, low-battery chips made by ARM now dominate the smartphone and tablet markets. About 80% of all mobiles, including Apple's iPhone 4, are built around chips made from Arm designs. Also, at the Consumer Electronics Show in Las Vegas, chip designer Nvidia confirmed the existence of Project Denver, which will put ARM CPUs and Nvidia GPUs on the same chip.

During the quarter in review, ARM Holdings plc also reached an agreement with International Business Machines Corp. to extend their collaboration on advanced semiconductor technologies to enable the rapid development of next generation mobile products optimized for performance and power efficiency. Through this agreement ARM and IBM will collaboratively develop design platforms aligning the manufacturing process, microprocessor and physical IP design teams. The collaboration will minimize the risk and barriers to migrating to smaller geometries while enabling optimized density, performance, power and yield in advanced SoC designs; accelerating the introduction of advanced electronics into the marketplace.

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