Herein we return our attention to the phenomenon of the rise of Intellectual Property (IP) in the world’s Electronics Industry, a segment of Electronic Design Automation (EDA) that Henke Associates began reporting on separately in 2003.
At the beginning, we covered eight (8) publicly-traded IP companies (called the "Group-of-8" or "G8"), as representative of the financial state of the nascent Electronics IP Industry. Subsequently, ARM absorbed Artisan Components in 2004; Mentor Graphics acquired LogicVision in 2009; and Synopsys bought Virage Logic in 2010. So nowadays, when we report on the Electronics IP Industry quarterly financials, the G5 listed below are included:
The Q2 2011 financial results of the G5 IP vendors were posted here on August 22, 2011, just at the beginning of a period of economic volatility that was precipitated by the debt ceiling debate in Washington DC and subsequent reduction of the USA’s credit rating by S&P from AAA to AA+.
The aforementioned continuing volatility in the economy is visible to anyone looking at the stock markets’ performances. Below is a graph of the last six months of the NASDAQ Composite, for example. Please note: (a) the relative stability at just above the 2800 level for the initial months shown till late July 2011; (b) the steep plunge to below 2400 by mid-August; (c) the relatively wild oscillations since, and (d) never closing at 2800 or above since.
NASDAQ Close Nov 04 = 2686.15
52 week range = 2298.89 – 2887.75
G5 Electronics IP Vendor by Vendor Details – Q3 2011
Just for variety, let’s first look at the
individual performances of each member of the Group of Five (a.k.a. the G5) Electronics IP players for nominal Q3 2011. Then we’ll follow up with a summary of the by-now-familiar Tables of Revenues and Profits of the entire G5 for Q3 2011 (and the four quarters leading up to Q3 2011), as well as some graphs of previous year-by-year P&L’s.
On October 25, 2011 ARM Holdings plc announced its unaudited financial results for the third quarter ending September 30, 2011.
ARM Progress on key growth drivers in Q3 2011
Growth in adoption of ARM® processor technology
- 28 processor licenses, including 14 new customers, many of whom are established semiconductor companies buying their first ARM processor license
- 9 Cortex™-A and 14 Cortex-M series processor licenses signed, including a next generation processor designed for the smallest and most energy-efficient embedded microcontrollers
- Licenses signed for a broad range of end-markets including automotive applications, computers, microcontrollers, mobile phones, enterprise networking, sensors and smartcards
Growth in shipments of chips based on ARM-processor technology
- 1.0 billion chips shipped into mobile phones and mobile computers, up 10% year-on-year
- 0.9 billion chips shipped into consumer and embedded digital devices, up 50% year-on-year
Growth in outsourcing of new technology
- Physical IP: 4 Processor Optimization Pack (POP) licenses signed for Cortex-A series processors, including the first Cortex-A15 POP at 28nm
- Mali™ Graphics: 2 Mali licenses signed for mobile computing and digital TV
Warren East, Chief Executive Officer, said, “In the third quarter of 2011, we saw a continued high level of design activity with many new customers licensing ARM technology for the first time, driven by end market requirements for smarter, low-power chips. Demand for our technology has come from a broad range of applications, from sensors to computers.”
“Over the last year we have seen strong growth in shipments of ARM technology-based chips, with a 50% increase of shipments into non-mobile markets such as digital TVs, microcontrollers and networking applications. Royalty revenues in Q3 have been impacted by the below seasonal growth in the semiconductor industry, but we continue to gain share. With customers looking to design ARM technology into a widening product portfolio, ARM is continuing to invest in the development of new products to drive long-term growth in our revenues, profits and cash,” concluded East.
ARM says it enters the final quarter of 2011 with a healthy opportunity pipeline for licensing and an order backlog which remains at historically high levels. This combination points to another strong quarter for license revenue in Q4 2011 and a robust order backlog at the year end. ARM Q4 2011 royalty revenues are generated from third quarter chip shipments. Data for the third quarter indicates that relevant industry revenues were broadly flat sequentially.
Notwithstanding the below-seasonal activity levels in the wider semiconductor industry, ARM expects that group dollar revenues for the full-year 2011 will be in line with current market expectations of around $763 million.
Total IFRS revenue for ARM in Q3 2011 was $192.3 million, up 22% over $158.1 million in Q3 2010, but only 1.1% more than sequential Q2 2011 revenue of $190.2 million. (The revenue fx rates [$/pound] used by ARM were 1.60 for Q3 2011, and 1.58 for Q3 2010).
Total IFRS earnings for ARM in Q3 2011 were approximately $50,235 thousand, up 17.12% vs. sequential Q2 2011’s $42,890 thousand, and up an impressive 114.87% year-over-year vs. $23,379 thousand in Q3 2010.
As of September 30, 2011, ARM had 2,039 full-time employees, a net increase of 150 since the start of the year, being mainly engineers joining ARM’s processor R&D teams. At the end of Q3 2011, the group had 850 employees based in the UK, 530 in the US, 234 in Continental Europe, 293 in India and 132 in the Asia Pacific region.
ARM self description
ARM designs the technology that lays at the heart of advanced digital products, from wireless, networking and consumer entertainment solutions to imaging, automotive, security and storage devices. ARM's comprehensive product offering includes 32-bit RISC microprocessors, graphics processors, video engines, enabling software, cell libraries, embedded memories, high-speed connectivity products, peripherals and development tools. Combined with comprehensive design services, training, support and maintenance, and the company's broad Partner community, they provide a total system solution that offers a fast, reliable path to market for leading electronics companies. More information on ARM is available at