More on ARM
ARM Q2 results
ARM continued strong growth with second quarter revenue growth of 21% only slightly lower than in the first quarter. Growth at PIPD, the former Artisan business which ARM acquired, has fallen further to a mere (by ARM’s standards) 7%, further reinforcing our concerns about the price ARM paid for Artisan. ARM has also announced a rolling share buy-back plan; a way of returning some money to shareholders without raising expectations in the way that an increase in the dividend would.
The combined business is spending a significantly lower proportion (29% vs 37%) of revenues on R & D than ARM did pre-merger. This seems to largely be a result of Artisan’s low R & D spend with the ARM business spending just as much. However while R & D has not been cut (and indeed has increased in absolute terms) we find the fact that Artisan did not spend of R & D a little off-putting.
Growth in the original ARM business has barely faltered (25% vs 27%) and we expect this to continue given that there is increasing demand for sophisticated mobile devices (consider sales iPods, digital cameras and mobile phones), auto electronics and networking equipment all of which are areas in which ARM has a very strong position. We can see no serious rivals in the in high end mobile devices in the foreseeable future, the long term for the other markets is less certain. Our previous notes on ARM discuss this at greater length.
Little else has changed since we last looked at the company. The price has risen to 118p pushing the prospective PE up to 24×
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