Commentary: Electronics IP Industry - A November 2004 Update


Net earnings per GAAP were $4.5 million, down 27% from $6.2 million the prior quarter and up 78% from the same quarter a year ago. Pro forma net income was $6 million compared to $2.7 million a year ago. In the quarter, Artisan had $1.8 million in costs related to the proposed merger with ARM Holdings plc.

For fiscal 2004, total revenue was $88.5 million compared to $68.5 million fiscal 2003. License revenue of $57 million was flat, but royalty revenue of $31 million was up nearly 200%. Net income for fiscal 2004, on a GAAP basis, was $19.2 million, an increase of 162%, compared with net income of $7.3 for fiscal 2003. Pro forma net income for fiscal 2004 was $17.4 million, an increase of 112%, compared to $8.2 million for fiscal 2003.

"Artisan is playing a critical role in connecting high-volume design teams with leading manufacturers," said Mark Templeton, president and chief executive officer of Artisan Components. "Our growth reflects the success of this vibrant and growing community."

On October 26, 2004 CEVA Inc reported its results for the third quarter. Total revenue for the quarter was $9.7 million, a slight increase from the $9.6 million reported in the second quarter 2004 and a 4% increase compared to $9.3 million in the third quarter 2003. The company had predicted modest revenue growth and profitability in the quarter. Third quarter licensing revenue of $6.9 million was similar to the 2004 second quarter and increased 7% from $6.5 million in the third quarter 2003. There were 6 new licensing agreements in the quarter. Third quarter 2004 royalty revenue was $1.6 million, up 24% from $1.3 million reported in the second quarter 2004 and a 33% rise from the $1.2 million in the third quarter 2003.

Shipped units by licensees increased 30% to 30.5 million in the third quarter 2004 compared to 23 million shipped in the second quarter 2004 and a 110% increase from 14.5 million units shipped in the third quarter 2003. Royalty revenue and units shipped were records in what is traditionally a down quarter. Ceva expects 100,000,000 units for the year. 8.8 million of the units shipped by licensees in the quarter were from those currently paying per unit royalties. The other shipments were under prepaid royalties. There were a total of 26 licensees of which 17 are currently paying per unit royalties.

Third quarter net income increased 13% to $560 thousand compared with second quarter 2004 net income of $494 thousand. The company recorded a net loss of $1.1 million in the third quarter 2003. This is the 8th consecutive quarter of license revenue growth and the third straight quarter of profitability.

During the third quarter, CEVA completed six new licensing agreements including another licensee for CEVA-X and good adoption of CEVA's Serial-ATA solutions. In addition, a major Japanese wireless player was the first to license CEVA's Mobile Media solution following the launch of the technology in the quarter. Also during the quarter the firm made announcements that Atmel adopted CEVA for storage solutions, Zoran for DVD systems, Japan Radio Consortium for radio solutions, and Nemerix for location solutions.

"CEVA's strong end-market growth drivers - wireless and consumer multimedia - resulted in a record 30 million units shipped in the third quarter with CEVA technology embedded as our licensees continue to thrive in the DSP industry," said Chet Silvestri, President and CEO of CEVA. "Although it is traditionally our weakest quarter, CEVA's revenue, gross margin and net income all recorded sequential improvements. Furthermore, our strong cash position gives us the flexibility to pursue internal and external growth initiatives to further extend our position as the leading licensor of DSP technology."

On October 26th LogicVision reported its results for the third quarter. Total revenue for the quarter was $2.7 million, up 81% compared to $1.48 million in the same period last year and up 9.8% compared to $2.45 million in the prior quarter. This is consistent with its revenue forecast (i.e. in excess of $2.5 million. License revenue (62% of total revenue) was up 257% year-over-year and up 28% sequentially. Service revenue (36% of total revenue) was up 1.3% year-over-year but down 11% sequentially. Gross margins for the third quarter were 69 percent, compared with 64 percent for the second quarter. Higher licensing revenues, which earn the company's highest margins, contributed to the increase in gross margins. North America accounted for 77% of revenue with Japan making up most of the rest.

Net loss for the third quarter was $1.8 million, an improvement over net losses of $3.3 million and $2.1 million for last year and last quarter respectively.

"We were very pleased to have exceeded our third quarter guidance. Revenues were the second highest in the last eight quarters and our backlog going into the fourth quarter is strong at $18.2 million," said Jim Healy, president and CEO of LogicVision.

On October 14, LogicVision announced that it has entered into a definitive agreement to acquire SiVerion, Inc., a privately held Arizona-based provider of parametric yield analysis solutions. LogicVision has agreed to acquire SiVerion by issuing two million shares of its common stock and $2 million in cash at closing, plus a contingent future payment of up to $2 million if the per share price of LogicVision common stock is less than $3.00 on the two-year anniversary of the closing date. SiVerion will become a business unit of LogicVision.

"As previously discussed, we signed a definitive agreement to acquire SiVerion, Inc., which we believe will significantly broaden our yield-learning solution and accelerate time-to-yield for advanced designs and processes. We expect to close this acquisition by early November."

On October 20, 2004 MIPS Technologies, Inc reported results for the first quarter of its fiscal 2005 which ended September 30. Total revenue for the quarter was $14.6 million, up 40 percent compared to $10.4 million from the same period a year ago, primarily as the result of significant licensing activity in MIPS32 24K cores. The company had predicted that revenue would be flat or down 5% relative to last quarter's revenue of $14.2 million. There were 9 new license agreements in the quarter. On a sequential basis revenue grew a more modest 3%. Contract revenue was $7.9 million, an increase of 48 percent compared to $5.3 million in the comparable period in fiscal 2004. Royalties were $6.7 million, an increase of 32 percent compared to $5.1 million in the same quarter a year ago. Again on a sequential basis these categories grew only a few percentage points.

Net income for the first quarter of fiscal 2005 was $3.1 million compared to a net loss of $5.8 million for the same quarter a year ago and a gain of $2.6 million the prior quarter.

"Although the overall environment has slowed in the second half of 2004, we are seeing strong demand and revenue growth," said Casey Eichler, chief financial officer of MIPS Technologies. "The demand for all product families is strong, but the 24K core family is driving the top line as the 'right product at the right time' as it is very competitive in many markets.

John Bourgoin, president and CEO of MIPS Technologies, added "With eleven licenses completed in only six months following introduction, the 24K core family is by far the fastest growing MIPS' product in our history. This sets the stage for continued proliferation of the MIPS architecture into consumer and communications markets."

On October 28, 2004 Monolithic System Technology, Inc. (MoSys), reported financial results for the third quarter. Total net revenue in the quarter was $1.7 million, as compared to $3.4 million in the second quarter of 2004 and $3.5 million in the third quarter 2003, drops of about 50%. License revenue in the quarter totaled $128 thousand, down 89% from $1.3 million in the previous quarter and down 85% from the $1.8 million in the third quarter of 2003. There were two new revenue projects in the quarter. The company reported $1.5 million of royalty revenue in the quarter, a slight increase over the previous quarter's $1.4 million and the $1.2 million reported for the third quarter of 2003 and the 1.4 million the prior quarter. Royalties were received from 10 different licensees most with multiple SoCs in production. Product revenue fell from $691K to $76K as the company exits from the discreet component business. NEC, Marvel and Sony accounted for 33%, 14% and 12% of total revenue respectively.

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