Electronics IP Industry View - How important is the Intellectual Property market?

G8 performance guidance for the near future:

From news releases published by the G8 IP providers, and related SEC filings, we can paraphrase their performance guidance for the foreseeable future:

ARM Holdings plc (Cambridge, UK 7/22/03): "Underlying momentum in the business is supported by the level of licensing negotiations in progress, the recent introduction of new development systems products and the positive trend in royalty revenues. With inventory issues in Asia likely to impact our royalty revenues in the second half and given the Company's exposure to weakness in the US dollar, with 90 to 95% of ARM's revenues being in US dollars, we anticipate that despite the underlying momentum, revenues in the second half of 2003 will remain at similar levels to the first half with the third quarter possibly being weaker than the fourth quarter due to seasonality."

Artisan Components, Inc. (Sunnyvale, CA 7/17/03): "Financial Guidance for the fourth [fiscal] quarter [i.e. next quarter] Revenue of $19.45 million and net income of $2.388 million, [both up sequentially], and for the fiscal year ending September 30th revenues of $68.475 million and net income of $7,193 million."

LogicVision, Inc. ( San Jose, CA 7/21/03): "We are expecting revenues to be comparable or slightly higher than Q2 revenues of $1.4 million. We are expecting net losses and earnings per share to be comparable to or slightly less than Q2 results of loss of $4 million. We expect bookings to increase in Q3 leading to improvement in revenue and net loss for Q4."

MIPS Technologies, Inc. (Mountain View, CA 7/23/03): Casey Eichler, chief financial officer for MIPS Technologies, said, "Our restructuring plans are on track to be completed by the end of September and we reiterate our guidance for breakeven by the December quarter." John Bourgoin, Chairman & CEO, said, "During the course of this [past] year, we took some difficult, but appropriate, actions to reduce spending which we believe will set the stage for profitability during the second half of fiscal 2004. We have also strengthened our development capability in key product areas such as synthesizable cores, and we expect to add to our industry-leading synthesizable core product offerings during the coming quarters." Guidance for 1Q F2004 is total revenue $9.5 to $10 million and total expense $15 million to $15.5 million (including $2.4 million restructuring and $1.4 million amortization of CAD tools). For F2004 revenue $43 million to $46 million. Net earnings 8 cents to 11 cents. Subsequent news: On August 26, MIPS Technologies Filed a Proposal to Combine Outstanding ``MIPS, MIPSB'' Common Shares. On August 29, MIPS Technologies, Inc. announced that it had elected Anthony B. Holbrook as its non-executive Chairman of the Board of Directors, effective August 28. Holbrook has been a member of MIPS Technologies' Board of Directors since the company's IPO in 1998.

Monolithic System Technology, Inc. (Sunnyvale, 7/17/03): Guidance for the third quarter of 2003: expects to report revenue in the range of $4.5 million to $5 million compared to $4.47 million in 2Q. Wall Street analysts on average were expecting the Company to report revenue of $5.41 million for the third quarter of 2003, according to Reuters Research (July 17, 2003).

ParthusCeva, Inc. (San Jose, 7/22/03): Chet Silvestri, Chief Executive Officer of ParthusCeva, commented: "I am pleased that ParthusCeva has achieved operating profitability and positive net income in the second quarter, driven by robust licensing performance with six licensing agreements signed. We achieved continued strong adoption of our open-standard DSPs, including two with semiconductor companies ranked in the top five worldwide. I am also delighted with 41% quarter-on- quarter growth in royalty revenues, as our licensees successfully ship products containing ParthusCeva technology. We have sustained our licensing momentum in the first weeks of the third quarter. This momentum, underpinned by a portfolio of new DSP and platform products we plan to launch in the next couple of quarters, gives us confidence that we can achieve our corporate goals of profitable growth and technology leadership."

Rambus, Inc. (Los Altos, 7/14/03): Rambus estimated revenue for Q3 would be roughly flat between $28 million and $30 million. It expected non-litigation expenses would be between $17 million and $19 million vs. $17.5 million in Q2. The increase is mainly due to investment in XRD and Redwood projects. Rambus said litigation expense is always difficult to predict because it does not control the timeline nor requests form the court not does it control actions taken by its adversaries which causes the company to incur expense. Rambus expects litigation expenses in Q3 to come within a broad range somewhere between $5.5 million and $8.5 million, vs. $6.4 million in Q2.

Virage Logic Corp. (Fremont, CA 7/24/03): The company currently expects total revenues in the range of $9.7 to $10 million. The company currently anticipates that royalties will approach approximately $1.0 million for the fourth quarter. In addition, the company expects total pro forma operating expenses to be reduced sequentially by approximately $200,000 from those of the third quarter of fiscal 2003. Net interest income and the company's effective tax rate are expected to remain fairly consistent on a sequential basis.

How have the G8 electronics IP Providers fared in the 2003 YTD stock markets?

In Figure 5 below, we list the Group-of-8 IP provider companies' stock prices on January 2, 2003 and August 29, 2003, along with the ratio of the latter price over the former, expressed as a percentage. The same data for the Top 3 EDA Vendors are shown in Figure 6.

Finally, listed in Figure 7 are similar numbers for the Dow Jones Industrial Average (DJIA), the NASDAQ Composite (NASDAQ), and the Standard & Poor's 500 (S&P 500) indices.

Company Jan 2 close Aug 29 close Ratio Aug29/Jan 2
ARM Holdings 2.56 5.34 208%
Artisan Components 16.20 21.25 131%
LogicVision 2.12 3.08 145%
MIPS Technologies 3.39 4.11 121%
Monolithic System Tech 11.97 10.01 84%
ParthusCeva 4.20* 7.95 189%
Rambus 7.10 16.68 235%
Virage Logic 9.65 9.81 102%
Group-of-8 Basket 57.19 78.23 137%

Figure 5 - Closing US$ Prices on Jan 2 and Aug 29, 2003 for Group-of-8 IP Providers
* Price on Jan 31, 2003

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