Commentary: Electronics IP Industry - An August 2006 Update


Total license revenues in the second quarter were £28.6 million, representing 43% of group revenues, compared to £28.0 million in Q2 2005. Total royalty revenues in Q2 2006 were £26.1 million, representing 40% of total group revenues, compared to £20.1 million in Q2 2005, an increase of 30%.

Sales of development systems in Q2 2006 were £7.1 million, representing 11% of total group revenue, compared to £6.3 million in Q2 2005, an increase of 13%. Service revenues in Q2 2006 were £3.9 million, representing 6% of total group revenues, compared to £3.4 million in Q2 2005.


The Processor Division (PD), formerly the original ARM, had revenues of $76 million, an increase of 18.5% compared to the same period last year, and an increase of 7% compared to the prior quarter. The Physical IP division (PIPD), the Artisan division established after the acquisition at the end of 2004, had revenues of $23.7 million, essentially flat year over year and an increase of 7.2% sequentially. The PD division accounted for 76% of revenue and the PIPD division for 24%.

In May 2006, ARM acquired Falanx Microsystems AS, a 3D Graphics IP company headquartered in Trondheim, Norway that develops graphics accelerator IP and software for semiconductor SoC vendors. In June 2006, ARM acquired the assets and trade of PowerEscape, a private company based in France and the US. The number of employees increased by 100, half from acquisitions and one quarter form expansion in Bangalore, India.

Warren East, ARM Chief Executive Officer, said, “We are encouraged by the licensing activity we have seen in Q2 which generated a record bookings quarter for the group. Strong licensing of our newest processors and physical IP has helped to generate sequential increases of more than 15% in license revenues and more than 10% in the group's order backlog.”

Tim Score, ARM Chief Financial Officer, added, “Growth in revenue and earnings per share of 16% and 25%, respectively, in the first half of 2006 demonstrates again the long-term financial attractiveness of the ARM(R) business model. As well as investing organically in the quarter to accelerate technology innovation, we have also acquired a 3D graphics IP company and returned cash of £29m to shareholders via dividend and share buyback. We increased the amount spent on buying back ARM shares from £7m in Q1 to £22m in Q2 while retaining a robust balance sheet.”

On July 20, 2006 Ceva, Inc announced its financial results for the second quarter, the period ended June 30, 2006. Total revenue for the quarter was $8.4 million, a decrease of 12% compared to $9.5 million reported for the second quarter of 2005. This was in the middle of the guidance given a quarter ago. Total revenue for the second quarter increased 3% sequentially compared to $8.1 million reported for the first quarter of 2006. Licensing revenue was $6.0 million, a decrease of 9% year-over-year, and an increase of 13% sequentially. Royalty revenue was $1.4 million, a year-over-year decrease of 11% compared to $1.6 million, and a sequential decrease of 21% compared to $1.8 million. Revenue from services was $1.0 million, a decrease of 27% compared to $1.3 million for the second quarter of 2005, and a decrease of 2% compared to the first quarter of 2006.

In the quarter Ceva licenses shipped 44.7 million units, of which 20.1 million were from companies paying per unit royalties and of which 24.6 million were from companies paying from prepaid royalties. There are 24 licensees shipping product, of which 16 are paying per unit royalties. In the prior quarter, 48.7 million units were shipped.

CEVA's net loss for the quarter was $0.2 million, compared to net loss of $2.2 million for the same quarter a year earlier, and a net loss of $0.8 million in the prior quarter. In the year ago quarter, there was a charge of $1.7 million for reorganization and $510K for impairment.

In Q2 2006, nine license agreements were signed, bringing the total to sixteen new licensing agreements signed in the first six months of 2006. Of the nine license agreements, seven were for CEVA DSP cores and platforms, one for CEVA SATA technology and one for CEVA Bluetooth technology.

On June 27, 2006, CEVA announced the divestment of its GPS technology and associated product line to a new U.S.-based fabless company, GloNav in return for an equity ownership of 19.9% in GloNav on a fully diluted basis. The new company also has licensed the CEVA-TeakLite DSP core for the development of its GPS chipsets. GloNav concurrently acquired the RF technology, assets and team of RFDomus Inc., a US-based company. GloNav is financially backed by Atlantic Bridge Ventures, a European-based venture capital firm, which has made an investment of $16.2 million.

Gideon Wertheizer, Chief Executive Officer of CEVA, said, "The second quarter results illustrated continuous progress in our financial performance, both in revenue and profitability milestones set for 2006. We continue to reduce the company's operating expenses and for the first time in five quarters, we have presented a non-GAAP net income of $0.2 million. The recently announced divestment of our GPS technology and product line combined with the Company's cost control measures should further allow us to achieve additional profitability milestones."
On July 25, 2006 LogicVision, Inc reported financial results for the second quarter, the period ended June 30, 2006. Total revenue in the quarter was $2.8 million, an increase of 9% over the $2.5 million in the second quarter of 2005, and an 18% increase sequentially from $2.35 million. The $2.8 million was above the guidance given a quarter earlier. License revenue was $1.3 million, accounting for 47% of total revenue, a decrease of 12.6% year-over-year, and a 7% increase sequentially. Service revenue was $1.37 million, accounting for 49% of total revenue, an increase of 39% year-over-year and a 21% increase sequentially. The remainder of revenue was product.

Net loss for the quarter was $1.7 million, compared to net losses of $2.8 million and $2.2 million a year earlier and a quarter earlier, respectively.

James T. Healy, president and CEO of LogicVision, said, "In the second quarter, we were pleased to report positive cash flow from operations for the first time since 2003 and to achieve revenues and net loss better than the guidance we gave on our last earnings conference call. The low bookings we experienced were mainly due to the timing of certain orders that were delayed into our third quarter as they moved slower than expected through our customers' corporate legal review”.
On July 26, 2006 MIPS Technologies, Inc reported financial results for its fourth fiscal quarter and fiscal year ended June 30, 2006. Total revenue for the quarter was $18.3 million, an increase of 5% over third quarter revenue of $17.5 million, and an increase of 28% from the $14.3 million in revenue reported in the fourth fiscal quarter a year ago. The guidance had been for fourth fiscal quarter revenue to be flat with respect to the prior quarter.

Revenue from royalties, accounting for 57% of total revenue, was $10.4 million, an increase of 11% over the $9.3 million reported in the third quarter, and an increase of 47% from the $7.1 million reported in the fourth quarter of 2005. Contract revenue, accounting for 42% of total revenue, was $7.9 million, a decrease of 3% from the $8.2 million reported in the third quarter, but an increase of 10% from the $7.2 million reported in the fourth quarter a year ago.

Net income in the quarter was $4.5 million, compared with net income of $2.2 million in the third quarter. and $4.2 million in the fourth quarter of 2005.

Total revenue for fiscal year 2006 was $64.1 million, an increase of 5% over the $61.2 million reported in fiscal 2005. Royalty revenue. accounting for 57% of total revenue. was $36.7 million, an increase of 22% over the $30.0 million in fiscal 2005. Contract revenue. accounting for 43% of total revenue. was $27.4 million, a decrease of 12% from the $31.2 million reported last year. Net income for fiscal 2006 was $5.7 million. compared to $14.9 million in fiscal 2005. Operating expenses for F2006 were $61 million, an increase of 29%.

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