ARM Holdings plc Falls Despite Rise In Revenues

ARM Holdings (LSE: ARM) (NASDAQ: ARMH.US) is currently down over 3% so far this morning, despite releasing results for the first quarter of 2014 showing group revenues up 16% in US$ year-on-year (albeit only 10% in £, because of adverse moves in exchange rates) and processor licensing revenue up 38% in US$ year-on-year (34% in £).

Underlying processor royalty revenue was up 8% in US$ year-on-year, but was effectively halved because of a deduction necessary due to over-reporting of prior years’ royalties by a customer. Adverse exchange rate movements resulted in processor royalty revenue in £ falling 4%. Pre-tax profit is up 9%, at £97.1m, and earnings per share rose 5%, to 5.6 pence.

The company reported that there had been growth in the adoption of ARM technology, with 26 processor licences signed across multiple end markets from mobile computing to enterprise networking and chips for ‘Internet of Things’ devices. It also said that shipment of chips based on ARM processor technology was 11% higher year-on-year, with 2.9bn chips shipped.

Commenting on the results, Chief Executive Officer Simon Segar said:

Q1 was a good start to the year for ARM, with more customers choosing to license ARM technology for their future products, which helped drive ARM’s revenues.

“Licences are a precursor to future royalty revenues. Our customers are signing licences with a view to designing ARM technology into an increasingly wide range of markets from servers and supercomputers to embedded sensors and enterprise networking applications and thereby underpinning ARM’s future royalty opportunity.

At 952p, ARM’s share price is down 0.5% on this time last year, but remains 740% up over five years, to the continued delight of long-term shareholders.

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Jon does not own shares in ARM Holdings.