Electronics IP Industry – A November 2009 Update



Relative to earnings, Table 3 reveals that combined, the G6 IP Providers were again in the red, reporting a collective Q3 2009 net loss $22 million, compared to net losses of $18.7 million and $24.9 million in the year ago and the quarter ago periods, respectively. Rambus accounted for the bulk of the losses in all three periods. ARM, CEVA and MIPS managed net earnings while the other three suffered net loses.

On a year-over-year basis, ARM’s earnings fell 46%. Virage Logic and MoSys endured increased losses. MIPS had a turn around quarter going from a loss of nearly $7 million in Q3 2008 to a net gain of $595,000 in Q3 of 2009.

On a sequential basis, three IP vendors were up and three were down. MIPS went from a net loss of $6.7 million in Q2 2009 to a net gain of $595,000 in Q3 2009. ARM was up 9%, CEVA down 24% and MoSys essentially flat.

 

Q3 2009 Results of Individual Electronics IP Providers:




On October 27, 2009 ARM Holdings plc reported financial results for the third quarter ended September 30, 2009. Total revenue for the quarter was $123 million, a drop of 8.5% from the $134 million in the same quarter a year earlier, but a 16.6% gain from the $105 million in the prior quarter. Overall semiconductor industry revenues are forecast to have declined about 18% in the same period.

Total dollar license revenues in Q3 2009 declined by 14% year-on-year to $39.7 million, representing 32% of group revenues. License revenues comprised $30.9 million from PD and $8.8 million from PIPD. Total dollar royalty revenues in Q3 2009 declined by 6% to $62.3 million, representing 51% of group revenues. Royalty revenues comprised $53.1 million from PD and $9.2 million from PIPD.


PD royalty revenues in Q3 2009 declined 4% year-on-year. This compares with industry revenues declining by 20% in the shipment period (i.e. Q2 2009 compared to Q2 2008), demonstrating ARM’s continuing market share gains over the last 12 months.

PIPD royalties in Q3 2009 were $9.2 million. This did not include any catch-up royalties; therefore underlying royalty revenues were at a similar level to the $9.3 million reported in Q3 2008, compared to the forecasted decline in overall foundry revenue of 21% in the corresponding period.

Sales of development systems in Q3 were $14 million, a decrease of 4% year-on-year and representing 11% of group revenues. However, development systems revenue increased sequentially which was partly due to two large software tools licenses being signed in the quarter. Given that deals of this type are infrequent in this division, development systems revenues in Q4 2009 are expected to be closer to the underlying quarterly revenue run-rate of $10-$12 million.

Service revenues in Q2 2009 were $7.0 million, a decrease of 9% year-on-year and representing 7% of group revenues.

The Processor Division (PD), formerly the original ARM, had total revenues of $84 million, a decrease of 7.4% from the year ago quarter, but an 18.6% increase from the prior quarter. Twenty-eight processor licenses were signed in Q3. Twenty-three of the licenses were for ARM’s advanced Cortex and Mali™ graphics processors of which eight licenses were signed for the Cortex-A family processors. Thirteen of the licenses were signed for the Cortex-R and Cortex-M family of processors, for use in embedded applications

The Physical IP division (PIPD), the Artisan division established after the acquisition at the end of 2004, had total revenue of $18 million, a drop of almost 16% from the same quarter a year earlier, but a 5.9% increase from the preceding quarter ARM signed eight physical IP licenses in Q3 for technologies at process nodes from 180nm to 28nm for a wide range of ARM products

Net income for the quarter was $11.3 million a 46% decrease compared to $21.2 million in the year ago quarter but a 7.8% gain from the $10.5 million in the previous quarter.

Warren East, Chief Executive Officer, said, “Q3 was a good quarter for ARM. Despite pressure on customers’ R&D budgets we are pleased that continuing strong demand from industry leaders, combined with our broadest range of products and effective use of licensing models, has delivered a record number of processor licenses. We are particularly encouraged by the licensing of ARM’s next generation processor technology, and by the first license to a leading fabless semiconductor company of ARM's advanced 28nm physical IP. Such agreements are the drivers of ARM’s long-term royalty growth, and as ARM becomes the technology of choice in smart, connected and low-power consumer electronic devices we continue to gain market share.

Once again we have demonstrated the resilience in the ARM business model; our improving revenue and disciplined cost control has delivered a sequential improvement in margins and profitability, as well as a high level of cash generation.”



On October 28, 2009 CEVA, Inc reported financial results for the third quarter the period ended September 30, 2009. Total revenue for the quarter was $9.7 million, a dip of 5.4% from the $10.2 million in the third quarter of 2008, but a 6% increase from the $9.1 million in the second quarter of 2009. License revenue was $5.2 million, accounting for 54% of total revenue. This was a decline of over 12% from the year ago quarter, but an increase of nearly 23% from the just prior quarter. Royalty revenue was $3.6 million or 38% of the total. This was an increase of 12% year-over-year, but a drop of 6.5% sequentially. Other Revenue of $723,000 accounted for the remaining 7.5%

During the third quarter, the Company concluded six new license agreements. Five agreements were for CEVA DSP cores, platforms and software and one agreement was for Bluetooth technology. Target applications for customer deployment are 2G ultra-low cost phones, 3G handsets, Smartphones, mobileTVs, portable multimedia and Passive Optical Networks (PON). Geographically, three of the agreements signed were in Europe and three in Asia.

During the quarter, CEVA customers shipped 89 million units, up 24% year-over-year, and up 34% sequentially. Of these units, 75 million were from customers paying per unit royalties, and 14 million were from customers on prepaid royalty.

Net income for the quarter was $1.7 million, an increase of 25% from the $1.4 million in the same quarter a year earlier, but a drop of over 24% from the $2.3 million in the just preceding quarter.

Gideon Wertheizer, Chief Executive Officer of CEVA, stated, "Our solid third quarter performance reflects a strong demand for our DSPs and technologies and a continued worldwide market share expansion in the handsets market which reached a record high of 23%. We are encouraged by the increasing demand for our newest technologies for the growing markets of LTE, MID, HD multimedia and Passive Optical Networks (PON)."

Yaniv Arieli, CFO of CEVA, stated, "Our third quarter results and the positive momentum in our business exceeded our expectations. As a result, our gross and operating margins as well as our non-GAAP net income and EPS reached record highs during the quarter. We also generated positive cash flow of approximately $4.0 million, bringing our cash balances and marketable securities to $91.8 million."

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