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ARM Swings to Loss on IP Write Down

04 February 2014

Processor intellectual property licensor ARM Holdings plc (Cambridge, England) made a net loss in the fourth quarter of 2013 on a write-down in the value of a patent portfolio acquired one year before.

With the impairment charge of £59.5 million (about $96.9 million) put to one side ARM's results reflected good business, as usual.

Sales in the quarter were £189.1 million (about $308 million), up 15 percent from £164.2 million (about $267 million) in the same quarter a year before. For the full year of 2013 ARM made a net profit on sales revenue of £714.6 million (about $1.16 billion), up 24 percent from £576.9 million ($940 million) in 2012.

In the quarter processor licensing revenue was up 26 percent year-on-year and processor royalty revenue was up 7 percent year-on-year.

The number of chips that shipped in 4Q13 containing ARM IP was estimated to be 2.9 billion, up 16 percent year-on-year with faster growth in low-cost microcontrollers, smart sensors and entry-level mobile devices. This included 400 million chips with Mali graphics processors, a figure that increased from 150 million in 2012.

ARM reported slower sales of chips for high-end smartphones in the second half of the year but said it also made good progress across many of its other established markets as well as making in-roads in servers and smart embedded applications.

ARM said that for 2014, despite the slower growth in the smartphone sector, it expects processor royalty revenue to grow at a similar rate to that achieved over the last three years.

"ARM's strategy is for our technology to continue to gain share in long-term growth markets, such as smartphones, tablets, enterprise equipment and embedded computing, and to increase the royalty percentage ARM receives from each device," said CEO Simon Segars, in a statement. "ARM saw good progress in Q4, as our latest technology was chosen by major companies in all our target markets, with further licenses signed for our latest ARMv8-A processors, Mali graphics processors and physical IP technology."

The reported loss of 0.4 pence per share, which with 1.414 billion shares outstanding equates to about £5.66 million (about $9.2 million), was due to changes at Bridge Crossing LLC, a consortium formed in December 2012 to acquire rights to the MIPS portfolio of patents for $350 million. As a member of the consortium ARM contributed $167.5 million, of which $100.5 million was classified within current assets as available-for-sale and $67 million was classified within other intangibles. However, in 4Q13 Bridge Crossing decided not to pursue a licensing strategy and sold the patent portfolio outright to ARM for $4 million which meant the portfolio had to be written down as no longer an available-for-sale asset, giving rise to a non-cash exceptional charge of £59.5 million.

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