Electronics IP Industry – A February 2010 Update

Net loss per share for fiscal year 2009 was $0.88 as compared to a net loss per share of $1.90 in fiscal year 2008.

“We finished the year with good revenue momentum in the fourth quarter thanks to stronger patent and technology royalties from consumer electronics shipments,” said Harold Hughes, president and chief executive officer at Rambus. “The agreement signed last week with Samsung Electronics is transformational for Rambus and will accelerate the market adoption of our patented innovations and leadership products.”

On February 3, 2010 Virage Logic Corporation (NASDAQ: VIRL) reported its financial results for its first fiscal quarter and the fourth calendar quarter ended December 31, 2009. Total revenue for calendar Q4 2009 was $21.658 million, a huge sequential increase of 64.72% over the $13.148 million in calendar Q3 2009, and an even more impressive year-over-year increase of 90.84% over the $11.349 million in calendar Q4 2008. The $21.658 million in calendar Q4 revenue exceeded the $19.0 million top of the range figure given as calendar Q4 revenue guidance last quarter by some 14%. It's also worth mentioning that Dr. Alex Shubat, Virage Logic's president & CEO, was hinting at beating even that revenue guidance as early as November 9, 2009 in the interview with this writer for the EDA Weekly, “Virage Logic -On the Move”.

License revenue for calendar Q4 2009 was $16.9 million, compared with $8.5 million for the same period a year ago and $10.9 million for the just prior quarter. Royalty income for calendar Q4 2009 was $4.7 million, compared with $2.8 million calendar Q4 2008 and $2.2 million for the just prior quarter (calendar Q3 2009).

Virage Logic's GAAP net loss for calendar Q4 was $2.2 million, or ($0.09) per share compared to a net loss for calendar Q4 2008 of $2.6 million or ($0.11) per share, and net loss of $3.2 million or ($0.14) per share for calendar Q3 2009.

Virage Logic President and CEO, Dr. Alex Shubat said, “We are pleased with our record first quarter results, as they put us on track to achieve approximately 100% year over year revenue growth for fiscal 2010. We grew total license revenues by 55%, from $10.9 million in the prior quarter to $16.9 million in our first fiscal quarter. Our royalty income grew 114% from $2.2 million to $4.7 million. This strong increase in royalty income was a result of both increased wafer foundry utilization as well as royalties from our recent ARC International acquisition.”

“Fiscal 2009 was a pivotal year for Virage Logic and our first quarter fiscal 2010 results underscore the significant progress we made against the transformational goals we outlined in early 2007. The infrastructure and organizational alignments we made in fiscal years 2007 and 2008 enabled us to accelerate on our inorganic growth initiatives for fiscal year 2009 and beyond. Our recent acquisitions of ARC International and a portion of NXP's advanced CMOS IP portfolio in late fiscal 2009 were facilitated by these organizational changes. In addition, the increasing shift that large semiconductor IDMs are making towards a 'fabless' or 'fab-lite' business model have continued to play to our core strengths, enabling us to gain market share by serving as a Trusted IP partner to a broader account base. Finally, our continued focus on standard versus custom products and the deeper, strategic engagements we established with this expanded customer base has resulted in an increasing sales pipeline, both from a total dollar value and individual deal size. First quarter fiscal 2010 highlights of our continued progress against some of our stated transformation goals include:

Broadening our product portfolio to further establish Virage Logic as a single source provider of a broad line of semiconductor IP.
  • We announced the availability of the new ARC® 601 32-bit microprocessor, which offers more than twice the performance of the current market leading solution at a comparable size and power. The ARC 601, ideal for microcontroller replacement as well as embedded applications, expands our processor product portfolio, one that was already the second most widely used processor architecture in the industry, with ARC cores currently shipping in more than 425 million products annually.
  • We added a new member, the STAR™ (Self Test and Repair) Silicon Browser, to our flagship STAR™ Memory System product family. The STAR Silicon Browser increases the efficiency of post silicon test, system debug and embedded memory characterization.
  • The integration of the NXP team is on schedule. In addition, we are in the exploratory phase with our key customers, which will result in prioritizing the development and launch efforts of the acquired NXP IP portfolio.
  • Our Leadership team has been strengthened by the appointment of two new executives - Stuart Crumbaugh, Vice President of Finance, and Joshua Rom, GM of Analog Business Unit (as previously announced on January 11th).
Being first-to-market with next generation advanced technology products. We have expanded on our early leadership position at 40nm, and today have more than 20 customers actively designing SoCs at 40nm. We also continue our early leadership at 28nm, with the addition of two new end customers. As a result of our early leadership at these two advanced nodes, we believe our SiWare™ Memory, SiWare™ Logic and High Speed Interface products offer the industry's broadest portfolio of silicon proven IP.”

Dr. Shubat concluded, “We are encouraged by our first quarter fiscal 2010 results as well as our continued execution on critical key transformational initiatives. Today, our product portfolio has expanded to the point that our non-captive SAM (served available market) has grown from $200 million in 2007 to over a $1 billion in 2010. We are well positioned to serve as a single source supplier of a broad range of semiconductor IP, as evidenced by the increasing number of large, bundled, ratable agreements entered into with major IDMs and SoC providers. Our strong backlog, together with our solid sales pipeline and increasing customer engagements, will enable our company to enjoy record license revenue in fiscal 2010. In addition, we believe that revenue from royalties will continue to increase throughout fiscal 2010, as a result of strong growth in semiconductor wafer shipments.”

Stock Market Prices of the G6 Electronics IP Providers

Measured at the end of Q4 2009, Q3 2009 and Q4 2008, the combined G6 stock prices outperformed the NASDAQ Composite both sequentially and year-over-year. (All of the G6 firms are listed on the NASDAQ).

As shown in Table 3 below, the combined stock prices for the G6 increased 80.8% year-over-year and rose nearly 28% sequentially.

Relative to last year ARM and MIPS sock prices enjoyed over triple-digit percentage rises, with MIPS leading the percentage parade at +294%. The remaining four out-paced the NASDAQ's 44% rise, although Rambus managed to come closest at +53.3%.

Likewise, all of the G6 firms save Virage Logic outpaced the sequential 6.8% rise of the NASDAQ, with MoSys leading in percentage growth at 57.6% (on a small base), and RAMBUS close behind at +40.2%.

Recent Market Caps and Stock Prices

A look at the G6 stock prices and Market Caps since each firm announced its Q4 2009 financials, is shown in Table 4 below: These figures each came after the close of the U.S. markets on February 5, 2009:

Individual Company by Company Guidance

As guidance, Warren East described ARM as being "well-placed" for strong performance to continue. "Semiconductor manufacturers are increasingly designing ARM technology into their products, and as ARM technology becomes ever more pervasive in markets with long-term structural growth such as smart phones, digital TVs and microcontrollers," he said.

As guidance CEVA expects revenue in the next quarter (January - March 2010) to be in the range of $9.9 million and $10.9 million, compared to $10.18 million in the quarter just reported. GAAP EPS is forecast to be between $0.07 and $0.09.

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  • CEO February 12, 2010
    Reviewed by 'Sleensln Inf.'
    Extremely well written article. Full of useful information and advanced insight.

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