ARM Holdings Plc Lifts Dividend By 26%

Revenues soar but profit plunges at ARM Holdings plc (LON:ARM).

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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%.

But if you are looking for alternative investment opportunities with the potential to soar like ARM Holdings, we’ve pinpointed our favourite growth share and produced a special report in which we evaluate its finances, risks and growth prospects going forward. 

Hurry, though, as the company in question very recently surged over 10% in just one day! Simply click here to get your copy delivered to your inbox immediately — completely free.

> Sam does not own shares in ARM Holdings.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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