Commentary: Electronics IP Industry – An August 2007 Updat

Net loss for the quarter was $146K, compared to a loss of $2.1 million in the year ago quarter, and a loss of $969K in the just prior quarter.

Chet Silvestri, CEO of MoSys, Inc., said, "During the second quarter, we signed another Technology License agreement for our 1T-SRAM(R) at an advanced process node. This agreement will enable NEC Electronics (NEC) to incorporate our 1T-SRAM technology onto their 55nm process for use in chip implementations targeting next-generation consumer, graphics and networking applications.” He added “We are pleased with the growth in royalties that we are achieving due to the incorporation of our 1T-SRAM technology into the Nintendo Wii game console. The success of this game console is contributing to quarter-over-quarter growth in royalty revenues and increasing the visibility of our 1T-SRAM technology in the marketplace."
On July 26, 2007 Rambus, Inc. announced revenue for the second quarter, the period ending June 30, 2007. Total revenue for the quarter was $47.5 million, a decrease of approximately 5% from the $50.1 million in the first quarter, and a decrease of about 3% from the $48.9 million in the same quarter a year ago.

On June 11, 2007, Rambus announced that its customers have shipped over 25 million XDR™ DRAMs (extreme data rate dynamic random access memory).

On June 19, 2007, Rambus announced that its XDR™ memory architecture has been adopted in Texas Instruments Incorporated (TI) DLP£ technology. Projectors powered by the DLP chip utilizing the XDR memory architecture are said to provide unmatched image quality and stunning color, and are ideal for displaying movies, sports, games or digital photos.

As the restatement of the Company's historical financial reports has not yet been completed, Rambus will not release its second quarter 2007 earnings. In addition, Rambus does not expect to be in a position to file its Form 10-Q for the second quarter of fiscal 2007 by the August 9, 2007 filing deadline.

Rambus expects to file its Form 10-K for fiscal 2006 in the third quarter of fiscal 2007. Rambus is making every effort to file its delinquent annual and quarterly reports as soon as practicable. Rambus expects its financial restatements to included estimated pre-tax non-cash charges related to stock option issues of about $70 million for 1997 through 2005.

Harold Hughes, president and chief executive officer at Rambus, said, "We saw growing interest this quarter among customers for our XDR(TM) memory architecture. We believe our patented innovations and products like the XDR architecture are vital to delivering the high bandwidth needed in next-generation consumer electronics and computing applications."
On August 1, 2007 Virage Logic Corporation reported the financial results for its third quarter, the period ended June 30, 2007. Total revenue for the quarter was $11.3 million, a 26% drop from the $15.3 million in the year ago quarter, but a nearly a 7% increase from the $10.6 million in the prior quarter. License revenue at $8.2 million accounted for 73% of total revenue. This was a 26% decline from the third quarter of 2006, but just over 5% increase from the prior quarter. Royalties at $3.1 million accounted for 27% of total revenue. This was nearly a 28% decrease year-over-year, and an 11% rise sequentially. There were 8 new customers in the quarter. One customer accounted for more than 10%.

On a geographic basis North America accounted for 45% of total revenue, Asia 31% and EMEA 24%. License revenue by process node was 31% at 90nm, 28% at 65nm, 25% at 130nm and 16% other. Royalty revenue by process node was 68% for 130nm and 180nm combined, 27% at 90nm and less than 5% at 65nm.

During the quarter, the company incurred $0.6 million of restructuring charges in connection with consolidation of some of its operations, including the closing of its Seattle R&D site. The company now has 390 employees.

On June 7, 2007 the company announced the appointment of Pete Rodriguez as chief marketing officer and Kamalesh Ruparel as vice president of silicon technology. Rodriguez currently serves as a director for EXAR and previously served as president & CEO of Xpedion Design Systems, Inc., which was recently acquired by Agilent Technologies. Ruparel was vice president of engineering at Anchor Bay Technologies (also known as DVDO, Inc.), responsible for system and ASIC engineering. Previously he spent approximately ten years at Cisco Systems.

Virage Logic's net loss for the quarter was $1.2 million, compared to a loss of $1.6 million in the same quarter a year earlier, and compared to a loss of $1.8 million in the previous quarter.

Dan McCranie, president and chief executive officer of Virage Logic, said, "While we were able to grow revenue 7% sequentially to $11.3 million, we did not meet our minimum revenue guidance of $11.5 million. That said, the company did make significant improvements in securing new multi-year licensing contracts, particularly in the most advanced 45nm and 65nm process nodes. These contract wins resulted in our again achieving sequential total license backlog growth.”

Stock Market Prices of the G7 Electronics IP Providers

As shown in Tables 4 and 5 and Figure 2 below, the combined stock prices for the G7 increased in absolute terms 2.1%, but decreased 1.3% sequentially. The average percentage change was nearly 8% year-over-year and 2.6% sequentially. This compares to average increases in the three major stock indexes of 19.5% year-over-year, and 7.3% sequentially.

On a year-over-year basis Ceva, MIPS and ARM had growth of over 40%. MoSys had good growth at nearly 12%. On the other side LogicVision declined 47% and Rambus and Virage Logic both declined around 21%.

On a sequentially basis CEVA and ARM were the growth leaders of 18% and 12%, respectively. Rambus was the largest decliner at 15%.

Forecast Guidance from Individual IP Providers

The combined forecast for the third quarter of 2007 calls for a year-over-year increase of 8.4%, and a sequential rise of almost 3%. MoSys and ARM are the most optimistic at 19% and 16% year-over-year growth, respectively, with LogicVision, CEVA, and MIPS also with double-digit growth expectations. Virage Logic was the largest decliner at almost -17%. Rambus also declined over 5%. On a sequential basis Virage Logic is the growth leader at almost 11% with ARM and MoSys close behind. MIPS and Rambus forecast an 8% drop.

Individual Company by Company Guidance

ARM did not give guidance except to say that earnings would be in line with expectations. 46% of backlog is expected to be converted into revenue in the second half of 2007. During the recent analysts' call, the firm said it expected revenue for the year to be around $550 million, a 13% increase versus $484 million for the prior year. This translates to around a 16% increase in US$ for the second half of the year.

As guidance CEVA expects revenue for the next quarter to be in the range of $8.2 million to $9.2 million. This compares to $8.5 million in the quarter just reported and to $7.9 million in the same quarter in 2006. Revenue for the year is expected to be in the range of $34 million to $36 million, versus $32.5 million in the prior year.

As guidance LogicVision expects revenue in the next quarter to be in the range of $3.0 million to $3.2 million compared to $3.1 million in the quarter just reported and $2.7 million in the third quarter of 2006. The company is forecasting a net loss of $900K to $1.1 million.

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