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ARM Beats Estimates On Higher Demand For Its Microchips - Update

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ARM Holdings Plc (ARMH, ARM.L) reported Tuesday an increase in fourth-quarter profit on top of a 21 percent revenue growth, as the British chip designer saw strong licensing growth and higher royalty revenues, amid rising demand for its microchips. Normalized earnings and revenues topped Wall Street estimates. Looking ahead, the chipmaker expects 2012 revenues to match current market expectations, provided the macro situation does not deteriorate significantly. Following news, the shares rose nearly 7 percent in London.

In the fourth quarter, the company's profit before tax increased to 49.67 million pounds from 34.92 million pounds a year ago.

After adjusting for certain one-time items, normalized profit before tax was 69 million pounds, compared to 47.6 million pounds last year.

On a per-share basis, earnings per ADS rose to 11.19 cents from 10.28 cents last year. Normalized earnings per ADS grew to 17.28 cents from 13.61 cents in the year-ago quarter and beat analysts' estimate by 3 cents.

On average, six analysts polled by Thomson Reuters expected the company to earn 14 cents per share for the quarter. Analysts' estimates typically exclude special items.

Revenues for the quarter grew 21 percent to 137.8 million pounds or $217 million, and beat Wall Street estimate of $193 million.

Total dollar license revenues increased 21 percent to $78.9 million and represented 36 percent of group revenues. Total dollar royalty revenues improved 22 percent to $114.7 million and represented 53 percent of group revenues.

As the company generated more in revenues from royalty and licensing than from developing systems and services, its gross margin expanded to 96 percent from 94.9 percent a year earlier.

Fourth-quarter shipments of chips based on ARM-processor technology increased 10 percent year-on-year to 1.2 billion chips shipped into mobile phones and mobile computers. Chips shipped into consumer and embedded digital devices were 1 billion, up 40 percent from the previous year.

For the year 2011 as a whole, profit before tax increased to 156.9 million pounds from 110 million pounds in the prior year. In dollar terms, annual revenues grew to $785 million from $631.3 million reported last year, and beat analysts' estimate of $759.2 million.

Warren East, chief executive officer of the company said, "In Q4 and throughout 2011 ARM has seen strong licensing growth, driven by market-leading semiconductor companies increasing their commitment to ARM technology, and more new customers choosing ARM technology for the first time. We have also seen our royalty revenue continue to grow faster than industry revenues as the ARM Partnership gains share in our target markets."

Looking ahead, the company said the uncertain global macro-economic situation is likely to influence consumer and enterprise spending, which will impact semiconductor revenues and industry confidence.

However, it expects group dollar revenues to be in-line with current market expectations of around $200 million for the first quarter and $860 million for the full year.

The directors are also proposing a final dividend of 2.09 pence per share, up 20 percent from last year, to shareholders of record on May 4, 2012, payable on May 18.

ARMH closed Monday's regular trading at $28.36 on the Nasdaq.

ARM.L is currently trading at 637.36 pence, up 39.86 pence or 6.67 percent, on a volume of 2.45 million shares on the LSE.

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