ARM Holdings plc has announced strong results for the first quarter ended March 31, 2002. Revenues rose 30% to £42.1 million, 5% higher than Q4 2001. Profit before taxation was up 38% to £15.7 million, 13% higher than Q4 2001. However investors were alarmed by news that royalty revenues had slipped by 6% to £6.4 million in the first quarter compared to £6.8 million in the fourth quarter of 2001.
Unit shipments increased from 96 million to 110 million. ARM claimed average royalty rates were being impacted both by a change in product mix and by downward pressure on chip average selling prices.
Commenting on the first quarter, Sir Robin Saxby, Executive Chairman, said:
The demand for ARM as the leading RISC architecture, and the broadening range of our product portfolio has enabled us to report another strong set of results in what remains a challenging market. I would like to thank and congratulate the ARM team consisting of our employees and all our global partners for their contribution. I am especially encouraged by the continued creativity of our people under Warren’s leadership as we extend the growth drivers for our business.
Warren East, Chief Executive Officer, added:
Licensing momentum, both to existing and new partners, gathered pace in the quarter with 22 licenses being signed compared to 15 in the fourth quarter of 2001. The importance of non-CPU licensing has also grown in the quarter with additional hardware platform, software application and peripherals licenses being signed. Further underpinning of our future prospects is provided both by the introduction of the first product from our new ARMv6 architecture later in the year and by the achievement of record development systems sales in the quarter of £7.6 million, compared to £5.8 million in the fourth quarter of 2001. We are also encouraged by the 15% increase in unit shipments to 110 million in the fourth quarter of 2001(we report royalties one quarter in arrears).
Tim Score, Chief Financial Officer, said:
Our cost base in the quarter has benefited from the absence of significant legal costs following the settlement of the litigation with picoTurbo at the end of last year. Given market conditions, we have continued to manage the growth in headcount cautiously with staff numbers increasing by 16 in the quarter, giving us an overall headcount of 738 at the end of March 2002. These factors, together with a 0.9% uplift due to the introduction of recent US GAAP changes regarding the amortization of goodwill, contributed to the increase in operating margins to 35.3% from 31.7% in fourth quarter of 2001 and 32.1% in the corresponding period last year.