Electronics IP Industry – Q2 2012

Introduction

This is the August 22, 2012 article for the EDACafe.com EDA Commentary, entitled, “Electronics IP Industry – Q2 2012.”

Herein we return our quarterly 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 from around the world (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: 

 

LAST YEAR’S (Q2 2011) G5 IP financial results were posted here on August 22, 2011, in the midst of a period of economic volatility that was precipitated by the US Government's debt ceiling debate in Washington DC. The debate was started when a small group from one political party chose that routine approval process to try to advance its radical “tea party” agenda. The results of that debate were economic uncertainty and the subsequent reduction of the USA’s credit rating by S&P from AAA to AA+.

The aforementioned continuing volatility in the economy was visible to anyone looking at the stock markets’ performances by the time of the posting of the Q3 2011 IP Industry Commentary on November 14, 2011. Below is a graph of the six months of the NASDAQ Composite leading up to that date. Please note: (a) the relative stability of the Composite curve 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 2011; (c) the relatively wild oscillations from mid-August 2011 through mid-November 2011; and (d) the NASDAQ Composite index never closing at 2800 or above during the entire reporting period after mid-August 2011 through November 14, 2011:


          NASDAQ Close Nov 04, 2011 = 2686.15

52 week range up to Nov 04, 2011 = 2298.89 – 2887.75




In December 2011, the market again began reflecting actual economic promise, but it wasn’t until January 25, 2012 that the NASDAQ Composite finally closed above 2800 again. By then, the US economy had begun to show consistent improvement, breaking through the artificial barriers from the political opposition.

So from mid December 2011 on, with only a few minor valleys, the NASDAQ Composite grew at a powerful upward slope, flirting with 3090.08 on March 21, 2012, closing at 3067.92 on March 23, 2012, having just closed at a high of 3078.32 on March 19, 2012.

The NASDAQ market then flattened out through mid-March and  continued for the most part to enjoy life above the 3000 level for nearly three months of health, until the index began slipping a little in the period between May 04, 2012 and May 19, 2012, where we left it in our last quarterly IP Commentary:

 

 

The initial impact of that worrisome May 2012 market deterioration on the individual and collective IP G5 vendors’ Stock Prices and Market Caps was presented at the conclusion of the May 25 IP Commentary for Q1 2012:

 

 

Negligible Dips

As it happened, however, that May 2012 market dip turned out to be far shorter and shallower than the dip endured from August to December 2011. The May 2012 dip closed below 2800 for only 4 days before returning to a healthier upward slope around June 12 to close above 3000 again on August 7, 2012, then closing at 3062.39 on August 16, 2012. See the right side of the chart below.

 

 

So the stock market during calendar Q2 2012 (April, May and June 2012), the period of the G5 IP financial reports herein, was fairly benign, as the left side of the chart above shows.

Indeed, when one considers the disastrous state of economy as the year 2008 ended (the January 2009 gaping valley on the NASDAQ price chart below was at 1268), compared to the IXIC’s overall performance for the past 43 months, the dips since by comparison have been very shallow indeed:

 

 NASDAQ Composite                        August 10, 2012


|      2009       |      2010        |       2011        |    2012-->  

 

G5 Electronics IP Vendor by Vendor Details – Q2 2012

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 Q2 2012. Then we’ll follow up with a summary of the by-now-familiar Tables of Revenues and Profits of the entire G5 for Q2 2012 (and the four quarters leading up to Q2 2012), as well as some bar graphs of previous and current quarterly P&L’s.

All of the G5 Electronics IP vendors were prompt this quarter in releasing their respective financial results. Indeed, if the original schedule had been followed, the five Q2 2012 reports would have all been released between July 18, 2012 and August 6, 2012, a span of only 20 days. However, MIPS required more time to complete its August 6th Q2 report, issuing it finally on August 15, an actual span of 29 days.

 

 

ARM Holdings is the world's leading semiconductor intellectual property (IP) company. ARM’s strategy is for its technology to continue to gain share in long-term structural growth markets such as mobile phones, consumer electronics and embedded digital devices. To date, ARM has licensed its technology nearly 850 times to nearly 300 ARM partners, who have shipped over 30 billion ARM-based chips.

On July 25, 2012 ARM Holdings plc announced its unaudited financial results for Q2 2012, the second quarter ended June 30, 2012.

ARM IFRS Revenue in Q2 2012 increased to £ 135.5 million, up only 2.26% sequentially over the £132.5 million in revenue achieved in Q1 2012, but up 15.2% year-over-year vs. the £117.8 million revenue posted in Q2 2011.  

Expressed in US$, ARM IFRS Revenue in Q2 2012 increased to $213.0 million, up only 1.72% sequentially over the $209.4 million in revenue achieved in Q1 2012, but up 11.99% year-over-year vs. the $190.2 million revenue posted in Q2 2011.

ARM IFRS Profit Before Tax (PBT) in Q2 2012 was £54.8 million in Q2 2012, up only 6.82% sequentially over the £51.3 million in PBT achieved in Q1 2012, but up 62.13% year-over-year vs. the £33.8 million PBT posted in Q2 2011.

The foregoing translates to ARM IFRS Profit Before Tax (PBT) of $86.04 million in Q2 2012, up 5.48% sequentially over the $81.57 million in PBT achieved in Q1 2012, but up 58.10% year-over-year vs. the $54.42 million PBT posted in Q2 2011.

ARM IFRS Net Income was £ 39.4 Million in Q2 2012, up only 5.35% sequentially over the £ 37.4 million in net income achieved in Q1 2012, but up 48.29% year-over-year vs. the £ 26.57 million net income posted in Q2 2011.

In US$, ARM IFRS Net Income was $61.86 million in Q2 2012 , up only 4.02% sequentially over the $59.47 million in net income achieved in Q1 2012, but up 44.61% year-over-year vs. the $42.78 million net income posted in Q2 2011.

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