Electronics IP Industry View - An update

In a September 2003 Electronics IP Industry Commentary, the authors first examined the recent history and future outlook of the remarkable phenomenon of electronics intellectual property (IP) providers, a niche that has emerged in its own right to claim a substantial amount of revenue in the world of electronics design automation. We arbitrarily selected eight (8) publicly traded companies (hereinafter known as the "Group-of-8" or "G8"), as representative of the current state of the electronics IP industry.

Financial performances through Q2 2003 were the foci of the September article. In this Commentary, we look at the performances of these IP vendors during the third quarter of 2003.

Group-of-8 (G8):

ARM Holdings plc
Artisan Components, Inc.
LogicVision, Inc.
MIPS Technologies, Inc.
Monolithic System Technology, Inc.
ParthusCeva, Inc.
Rambus Inc.
Virage Logic Corp.
Cambridge, UK
Sunnyvale, CA
San Jose, CA
Mountain View, CA
Sunnyvale, CA
San Jose, CA
Los Altos, CA
Fremont, CA

How did the Group of 8 perform in the third quarter of 2003?

For discussion purposes, we assume that all of the G8 companies' revenues are electronics IP and directly related IP services. On the revenue front the total combined Q3 performance was only slightly up sequentially but up 6.8% year over year. ARM, Artisan, MIPS, and ParthusCeva improved relative to both the prior quarter and the same period last year. MoSys declined relative to both earlier periods. LogicVision and Virage Logic improved sequentially but were down year over year. The reverse was true for Rambus. See Table 1 and Figure 1 below:

ARM is the industry leader with 39% market share. Rambus is a distant second at 21% share. Artisan Components at 14% is the only other vendor to reach double-digit market share. See Figure 2.

Table 2 below sets forth the earnings for the G8 vendors for Q3 2003. The combined quarterly earnings of IP vendors increased 175% sequentially, but fell nearly 60% with respect to the same quarter a year ago. Only ARM and Artisan Components had increased earnings both sequentially and year over year. Earnings of all other IP vendors fell year over year. Only ARM, Artisan and Rambus had positive net income in all three periods while MIPS and LogicVision had net losses in all periods. The ongoing earnings concerns of many of the G8 IP providers are evident in Figure 3 below.

Detailed Q3 2003 Results for the G8 IP Providers:

On October 21, 2003, ARM Holdings plc reported that its revenues and income before tax for the third quarter of 2003 were both down compared with the same quarter a year ago. Revenues were £31.7 million for Q3 2003, down about 5% from £33.3 million for Q3 in 2002, but an improvement of 1% on the second quarter revenues of £ 31.4 million. License revenues amounted to £13.1 million, up from £12.7 million in Q2 2003 and 16 licenses for microprocessor cores were signed in the quarter, compared to 11 in the previous quarter. This brings the number of semiconductor partners to 122. Royalty revenue set a record at #11 million on 188 million units shipped, an increase of 77% compared to £6.2 million a year earlier and up 8% from £10.2 million in the prior quarter. Sales of development systems and service revenue were down relative to both prior periods. Expenses were up due mostly to the acquisition of ARM Belgium, which added around £0.7 million to R&D expenses. Income before tax was £6.84 million for the quarter, down by 14 percent from £7.98 million for the third quarter a year ago. It was a 4% improvement on income before tax achieved in the previous quarter of 2003 though. Net income was £6.963 million for the quarter, up 24% from £5.593 million for the third quarter a year ago. Earnings per share were EPS were .5 pence (2.3 cents per ADS) down from .6 pence (2.7 cents per ADS).

Commenting on the third quarter results, Warren East, CEO, said: "Following the up-tick in licensing activity in Q2, we are pleased to see the promising mix of license deals in Q3 between new and existing partners, across a range of licensing models. We see this improvement arising both as a result of the increased adoption of the ARM architecture among semiconductor companies and of the timing of the ARM11 product cycle. New product introductions are expected to continue to drive further licensing opportunities; however we remain cautious as to when ARM's licensing revenues will benefit from any general semiconductor recovery."

Tim Score, CFO, added: "We are encouraged by further sequential increases in revenues and profits and by the generation of more than £10 million of cash in the third quarter. Nevertheless, we intend to continue to manage our cost base carefully as the timing of any general industry-led upturn in licensing activity levels remains uncertain."

On Oct 23, 2003, Artisan Components, Inc. reported its results for the three and twelve-month periods ended September 30, 2003. For the fourth quarter of fiscal 2003, Artisan reported total revenue of $19.5 million, a 66.4% increase over the $11.7 million in the fourth quarter of fiscal 2002. This was also a 3% increase over prior quarter revenue of $18.9 million. For fiscal 2003, Artisan reported total revenue of $68.5 million, an 83.9% increase over total revenue of $37.2 million in fiscal 2002.

Artisan has been dependent on a relatively small number of integrated circuit manufacturing customers for a substantial portion of its revenue, although the integrated circuit manufacturers comprising this group have changed from time to time. Four customers (Charter, TSMC, IBM and Starc) each accounted for more than 10% of revenue in quarter. Sales came mostly from Asia (Taiwan 21%, Singapore 19%, Japan 16%, rest of Asia 13%, North America 29% and Europe 2%)

Net income for the quarter was $2.5 million or $0.10 per diluted share, which included amortization of purchased intangible assets of $1.5 million and deferred stock-based compensation of $119K from acquisitions. For the fourth quarter of fiscal 2002, GAAP net income was $1.8 million or $0.10 per diluted share, which included amortization of purchased intangible assets from acquisitions of $491K. Net income for the prior quarter was $1.4 million or $0.06 per diluted share, which included amortization of purchased intangible assets of $1.5 million and deferred stock-based compensation of $150K from acquisitions. Note that there was a secondary public offering in the spring that increased the number of diluted shares by 41% from a year earlier and netted the company $58 million.

On a GAAP basis, net income for fiscal 2003 was $7.3 million or $0.34 per diluted share, which included amortization of purchased intangible assets of $4.4 million and deferred stock-based compensation of $328K from acquisitions. For fiscal 2002, GAAP net income was $2.1million or $0.12 per diluted share, which included amortization of purchased intangible assets from acquisitions of $2.0 million.

"The semiconductor industry is in a period of rapid change, with the number of dedicated manufacturers, as well as the number of companies sending designs to those manufacturers continuing to grow," commented Mark Templeton, Artisan's president and CEO. "Our record results indicate that Artisan's unique combination of products and technologies have been well accepted by the industry. More than 1,200 companies have licensed Artisan's products for their integrated circuit designs and many of our manufacturing partners are reporting improving factory utilizations, possibly signaling the start of a semiconductor recovery. In addition, we are seeing improving royalty results and are forecasting healthy growth through 2004. "

1 | 2 | 3 | 4 | 5  Next Page »


Review Article Be the first to review this article

Downstream : Solutuions for Post processing PCB Designs

Featured Video
Senior Electrical Engineer for Allen & Shariff Corporation at Pittsburgh, Pennsylvania
Upcoming Events
2018 FLEX Korea at Room 402/ 403, COEX Seoul Korea (South) - Jun 20 - 21, 2018
INTERSOLAR EUROPE 2018 at Munich Germany - Jun 20 - 22, 2018
DAC 2018 at Moscone Center West San Francisco CA - Jun 24 - 28, 2018
Symposium on Counterfeit Parts and Materials 2018 at College Park Marriott Hotel & Conference Center MD - Jun 26 - 28, 2018
DownStream: Solutions for Post Processing PCB Designs
TrueCircuits: IoTPLL

Internet Business Systems © 2018 Internet Business Systems, Inc.
25 North 14th Steet, Suite 710, San Jose, CA 95112
+1 (408) 882-6554 — Contact Us, or visit our other sites:
AECCafe - Architectural Design and Engineering TechJobsCafe - Technical Jobs and Resumes GISCafe - Geographical Information Services  MCADCafe - Mechanical Design and Engineering ShareCG - Share Computer Graphic (CG) Animation, 3D Art and 3D Models
  Privacy PolicyAdvertise