The State of Electronics IP in a volatile Economy

While quarter to quarter profit growth even for ARM is not completely steady, ARM holds the distinction of being the only vendor with all black numbers in earnings in this quarter’s Table 2 below. And of course, none of the other IP G4 runners up can come close to ARM’s 4-quarter earnings totals.

Overall, Table 2 shows lots of red; indeed, once again 40% of the entries in the IP G5 earnings table are in red font this quarter. The earnings table last quarter also sported an even 40.0% red numbers.

Notice that Table 1 columns far above calculate the percentage of one quarter over the other, as labeled, whereas in Table 2 just above, the relevant columns provide the numerical dollar differences in earnings between two different quarters as labeled.

Electronics IP Vendor by Vendor Details – Q2 2011


On July 26, 2011 ARM Holdings plc announced its unaudited financial results for the second quarter ended June 30, 2011.

ARM Progress on key growth drivers in Q2 2011:

  • Growth in adoption of ARM® processor technology
    • 29 processor licenses signed across a broad range of target markets
    • 9 Cortex™-A series licenses signed, including a further 2 licenses for Cortex-A15 for use in server infrastructure, and mobile computing applications
    • 12 Cortex-M series processor licenses signed as the momentum behind ARM processor-based microcontrollers continues
  • Growth in mobile applications
    • 1.1 billion ARM processor-based chips shipped into mobile phones and tablets



  • Growth beyond mobile into consumer electronics and embedded products
    • 0.8 billion ARM processor-based chips shipped into a broad range of consumer and embedded digital devices
  • Growth in outsourcing of new technology
    • Physical IP: 4 Processor Optimization Pack licenses signed for Cortex-A series processors
    • Mali™ Graphics: 5 Mali licenses signed, including two next generation Mali graphic processors


Warren East, ARM’s Chief Executive Officer, said, ““In the first half of 2011, we have seen strong license revenues driven by an increase in design activity around ARM technology across a broad range of end [user] applications. Major semiconductor vendors and consumer electronics companies are making long-term commitments to using ARM technology in their future product developments, underpinning growth in ARM’s long-term royalty revenues”.

Warren East

“As the addressable market for ARM technology grows, we continue to invest in the development of innovative technology, whilst simultaneously increasing revenues, profits and cash,” East concluded.

ARM Guidance

ARM enters the second half of 2011 with a healthy order backlog and a robust opportunity pipeline, which are expected to deliver strong performance in license revenues. Relevant data for the second quarter, Q2 being the shipment period for ARM’s Q3 2011 royalties, points to a small sequential increase in industry-wide revenues. Q4 2011 royalties are harder to predict, “as continuing macroeconomic uncertainties may impact consumer confidence,“ this last quote said with typical British understatement.

Given ARM’s relative mix of license and royalty revenues, ARM management expects overall Group dollar revenues in the second half of 2011 to be “in line with current market expectations.”

Total Revenues

Total IFRS revenue for ARM in Q2 2011 was $190.2 million, up 26.55% over $150.3 million in Q2 2010, but only 2.53% more than sequential Q1 2011 revenue of $185.5 million. (The revenue fx rates [$/pound] used by ARM were 1.61 for Q2 & Q1 2011, and 1.50 for Q2 2010).

Total Earnings

Total IFRS earnings for ARM in Q2 2011 were approximately $42,890 thousand, up 24.07% vs. sequential Q1 2011’s $34,569 thousand, and up 30.59% year-over-year vs. $32,844 thousand in Q2 2010.


On 15 June 2011, ARM purchased the entire share capital of Obsidian Software Inc. for $5.6 million in cash. This purchase has been accounted for as an acquisition. More details beyond the brief mention of this acquisition in the June 27, 2011 EDA/IP Almanac are now available, and these details are recounted here:

Obsidian, a company based in Austin Texas, is a market leader in verification and validation products and services used in the design of increasingly complex processors. Obsidian’s RAVEN software has been used by many of the world’s leading semiconductor companies. As system-on-chip (SoC) and processors grow in complexity there is an increasing need to develop more sophisticated verification strategies. This acquisition augments ARM's drive in matching its verification strategies with the rate of change in its high performance, complex SoC IP components. For these reasons, combined with the ability to hire the entire workforce of Obsidian including the founders and management team, ARM paid a premium for Obsidian, giving rise to goodwill. All intangible assets were recognized at their fair values, with the residual excess over net assets being recognized as goodwill.

All of the goodwill recognized is expected to be deductible for income tax purposes. As of June 30, 2011, the accounting for the acquisition has been determined only on a provisional basis, because the fair market values assigned to the Obsidian’s identifiable assets and liabilities have not been finally determined (due to the short period of time between the acquisition date and June 30, 2011). Any adjustments to these provisional values as a result of completing work of the fair market values will be recognized as if they had occurred at the acquisition date.

Worldwide ARM Headcount

As of June 30, 2011, ARM had 1,986 full-time employees, a net increase of 97 since the start of the year. At the end of June, the Group had 812 employees based in the UK, 533 in the US, 227 in Continental Europe, 289 in India and 125 in the Asia Pacific region.

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