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ARM Holdings Plc Lifts Dividend By 26%

Shares in ARM Holdings (LSE: ARM) (NASDAQ: ARMH.US) lifted over 3% in early trade this morning, as revenues increased by 26% to £171.2m in the second quarter.

However, pre-tax profit plunged to just £15m in the quarter, a 73% fall compared to £54.8m in Q2 2012. Management blamed rising costs for the likes of acquisitions and share-based payments, as well as £41.8m costs incurred in Q2 comprising “IP indemnity and similar charges, Linaro-related charges and share of results in joint venture and disposal and impairment of investments”.

As a result, fully diluted earnings per share were 0.75p in contrast to 2.83p in the comparative quarter last year.

There were myriad reasons that this didn’t depress the share price, though; ARM Holdings announced that its order backlog was up more than 10% sequentially, a new record, while the quarter also saw record net cash generation of £96m. Furthermore, the interim dividend was increased by 26% to 2.1p per share, from 1.67p in Q2 2012.

Elsewhere, the company’s key growth drivers showed signs of progression, as chief executive officer Simon Segars commented:

“We continue to see demand for ARM’s next generation technology, and in Q2 we signed five licenses for Cortex-A series processors, and seven licenses for ARM’s Mali graphics processor, demonstrating our leadership in both low-power processor and 3D graphics technology.

“During the quarter, our Partners announced exciting new design wins as ARM-based chips were selected for high-volume OEM products.  These included many new smartphones and tablets, ARM-based 64-bit servers and mobile base stations.

“In Q2, ARM’s processor royalty revenue again outperformed the semiconductor industry, growing at 24% year-on-year. In part this outperformance was driven by the growth in smartphones and mobile computing. These smart devices increasingly contain both ARM’s higher-royalty yielding Cortex-A processor technology and also ARM’s Mali graphics.”

ARM Holdings’ growth has been stratospheric, increasing more than 11-fold since 2009’s low of 81p. Over the last 12 months alone, the shares have improved over 80%.

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> Sam does not own shares in ARM Holdings.