Earnings and taxation
Profit before tax was £59.5 million in Q4 2012 compared to £49.7 million in Q4 2011. considered non-recoverable following a change in US state law. With the introduction of the Patent Box tax regime in April 2013, ARM’s full-year normalised effective tax rate in 2013 is expected to be around 20%.
Net Income for ARM in Q4 2012 measured in US dollars was $ million in Q4 2012, up % over Q3 2012, and up % above Q4 2011. Fully diluted earnings per share in Q4 were , compared to in Q3 2012 and to in Q4 2011.
Fully diluted earnings per share were 3.04 pence (14.8 cents per ADS) compared to earnings per share of 2.40 pence (11.2 cents per ADS) in Q4 2011. Normalised fully diluted earnings per share in Q4 2012 were 4.08 pence (19.9 cents per ADS) compared to 3.71 pence (17.3 cents per ADS) in Q4 2011.
Full-year 2012 fully diluted earnings per share prepared under IFRS were 11.51 pence compared to earnings per share of 8.19 pence in 2011. Normalised fully diluted earnings per share for 2012 were 14.70 pence per share compared to 12.45 pence per share in 2011
AS of December 31, 2012, ARM had 2,392 full-time employees, a net increase of 276 since the start of the year, being mainly engineers joining ARM’s processor R&D teams. At the end of Q4, the group had 993 employees based in the UK, 583 in the US, 296 in Continental Europe, 347 in India and 173 in the Asia Pacific region.
Principal risks and uncertainties
The principal risks and opportunities faced by the Group include but are not limited to: ARM's quarterly results may fluctuate significantly and be unpredictable which could adversely affect the market price of ARM ordinary shares; general economic conditions may reduce ARM's revenues and harm its business; ARM may have to protect its intellectual property or defend the technology against claims that we have infringed others’ proprietary rights; an infringement claim against ARM’s technology may result in a significant damages award which would adversely impact ARM’s operating results; companies within the semiconductor industry may consolidate reducing the number of customers that ARM may sell its technology to; for ARM to enter new markets or develop new technology may require significant investment and may not result in profitable operations; and ARM competes in the intensely competitive semiconductor market.
By now, almost all readers are familiar with five IP companies and the company spokespeople that are covered in this IP Commentary issued every three months. If you want refresh your memories, please refer to past issues by GOING TO THE WEBSITE BELOW:
Our first surprise is contained in Table 1, which contains the G5 Electronics IP Revenues for five quarters, starting with the most recent quarter ending September 30, 2012. We immediately notice a sequential revenue growth in Q3 2012 of 7.26% and year-over-year growth of a whopping 18.81% for the perennial leader ARM Holdings save one, but the next three of the IP vendors actually shrank in revenue recognized in the quarter compared to Q2 2012. While Rambus avoided shrinkage in Q3, it barely did so with only a token revenue increase of just over 2%.
Table 1's SUM of Revenue for the G5 IP companies for Q3 2012 [313.28 MILLION] still comes in larger than the lowest QUARTERLY REVENUE SUM ON THE CHART; THAT DUBIOUS HONOR GOES TO Q1 2012.
INDEED, THROUGH THREE QUARTERS OF 2012, THE G5 IP VENDORS TAKEN TOGTHER ARE ONLY AVERAGING $313.06 MILLION A QUARTER, ONLY A COUPLE MILLION A QUARTER THAN THEY AVERAGED IN ALL OF 2O11.
TURNING FINALLY TO NET INCOME, WE HAVE TABLE 2:
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.
About the writer:
Since 1996, Dr. Russ Henke has been active as president of HENKE ASSOCIATES, a San Francisco Bay Area high-tech business & management consulting firm. The number of client companies served by Henke Associates during those years now numbers close to fifty. Engagement lengths have varied from a few weeks up to ten years and beyond.
During his previous corporate career, Henke operated sequentially on "both sides" of MCAE/MCAD and EDA, as a user and as a vendor. He's a veteran corporate executive from Cincinnati Milacron (Research Scientist – Oakley, OH), SDRC (President & COO – Fairfax, OH & Milford, OH), Schlumberger Applicon (Executive VP – Burlington, MA), Gould Electronics Imaging & Graphics (President & General Manager – San Jose, CA), ATP (Chairman and CEO – Campbell, CA), and Mentor Graphics Corporation (VP & General Manager – PCB Division San Jose, CA & Professional Services Division – Wilsonville, OR).
Henke is a Fellow of the Society of Manufacturing Engineers (SME) and served on the SME International Board of Directors. Henke was also a board member of SDRC, PDA, ATP, and the MacNeal Schwendler Corporation, and he currently serves on the board of Stottler Henke Associates, Inc. (San Mateo, CA). He also serves as VP Business Development of Stottler Henke, focused on commercial applications of artificial intelligence.
In addition, Henke is a member of the IEEE and a Life Fellow of ASME International. In April 2006, Dr. Henke received the 2006 Lifetime Achievement Award from the CAD Society, presented by CAD Society president Jeff Rowe at COFES2006 in Scottsdale, AZ. In February 2007, Henke became affiliated with Cyon Research's select group of experts on business and technology issues as a Senior Analyst. This Cyon Research connection aids and supplements Henke's ongoing, independent consulting practice (HENKE ASSOCIATES). Dr. Henke is also a contributing editor of the EDACafé EDA WEEKLY, and he has published EDA WEEKLY articles every four weeks since November 2009; all URL's available.
Since May 2003 HENKE ASSOCIATES has also published more than 100 independent COMMENTARY articles on MCAD, PLM, EDA and Electronics IP on IBSystems' MCADCafé and EDACafé; most URL’s available.
Information on HENKE ASSOCIATES is available at http://www.henkeassociates.net
March 31, 2013 will mark the 1yth Anniversary of the founding of HENKE ASSOCIATES.