Tags: ARM | holdings | strategy | ARMH

ARM Holdings Strategy Holding Up

By    |   Tuesday, 11 Oct 2011 12:48 PM

Semiconductor and software company ARM Holdings (ARMH), whose processor designs are used by Samsung Electronics, Qualcomm, and Texas Instruments, is enjoying nice demand for its products and services these days. Despite the economy, its strategy is holding up.

Revenue in the second quarter of 2011 hit $190.2 million, up 27 percent from the same quarter in 2010. Pretax profits for the U.K. company came to $88 million, up 25 percent from the second quarter of 2010.

Business has been good, as orders for ARM's products and other services in the technology sector are up, says ARM Holdings CEO Warren East.

"In the first half of 2011, we have seen strong license revenues driven by an increase in design activity around ARM technology across a broad range of end applications. Major semiconductor vendors and consumer electronics companies are making long-term commitments to using ARM," East recently told investors.

Storms might not be brewing on the horizon, but a fog could be settling in. The company's outlook for the rest of the year is positive yet not without some economic concerns.

First, the positive. “ARM enters the second half of 2011 with a healthy order backlog and a robust opportunity pipeline, which are expected to deliver strong performance in license revenues. Relevant data for the second quarter, being the shipment period for ARM’s Q3 royalties, points to a small sequential increase in industry-wide revenues," the company says.

However, royalties are hard to forecast amid times of macroeconomic uncertainty, which could bruise consumer confidence and, ultimately, business for ARM's industry.

"Given ARM’s relative mix of license and royalty revenues, we expect overall Group dollar revenues in the second half of 2011 to be in line with current market expectations," management reports.

Downgraded

The company went through a slew of downgrades in 2010 — at least eight. Now, analysts see buying opportunities even if business is due for a breather.

Many downgrades remain in place, including recommendations to sell (Citigroup), hold (Deutsche Bank), and underperform (Jeffries). These are all 2010 analyses, however.

In September of this year The Benchmark Company upgraded to buy from hold. ARM Holdings will report third quarter earnings on Oct. 25.

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Semiconductor and software company ARM Holdings (ARMH), whose processor designs are used by Samsung Electronics, Qualcomm, and Texas Instruments, is enjoying nice demand for its products and services these days. Despite the economy, its strategy is holding up.Revenue in the...
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Tuesday, 11 Oct 2011 12:48 PM
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