Expect more details after the close from ARM Holdings (ARMH), which reported a solid third quarter but issued fourth quarter revenue and earnings guidance slightly below expectations.
Revenue in the three months ended in September rose 22% to $192.3 million. For the first nine months of the year, revenue rose 26% to $568 million. Gross margins held steady. Non-GAAP operating margins came in at 44.6%, and earnings of 15 cents per U.S. share exceeded the 13 cents analysts expected.
The company now sees fiscal 2011 revenue of $763 million, which implies fourth quarter 2011 revenue of approximately $195 million compared to the prior consensus of $196.4 million, notes Gary Mobley,? an analyst at Benchmark.? He sees fourth quarter non-GAAP earnings of 13 cents, a penny below the prior consensus.
Battling for the future of computing with Intel (INTC), ARM Holdings gushed about 14 new processor technology customers, including established semiconductor companies buying their first ARM processor license. It also reported a 10% increase in shipments of ARM chips for mobile phones and mobile computers, to 1 billion chips, and a 50% increase in shipments for consumer and embedded digital devices, to 900 million.
CEO Warren East said requirements for smarter, low-power chips are driving demand for a broad range of applications from sensors to computers. Known for its dominance in cellular basebands, mobile application processors and hard disk drive controllers, ARM is selling into other markets for non-mobile devices like digital TVs, microcontrollers and networking applications.
“Royalty revenues in Q3 have been impacted by the below seasonal growth in the semiconductor industry, but we continue to gain share. With customers looking to design ARM technology into a widening product portfolio, ARM is continuing to invest in the development of new products to drive long-term growth i! n our re venues, profits and cash.��
While still at record levels, the third quarter backlog of license and service revenue was flat, quarter over quarter, says Mobley who has a Buy rating on the stock. He adds:
“Considering weak chip industry sales trends, ARM PD royalty revenue is expected to trend flat q/q for 4Q11. Normally, ARM PD royalty units would trend up by approximately 10% q/q. Using management��s 4Q11 normalized operating expense guidance, our new 4Q11 non-GAAP EPS estimate will likely remain $0.13 (vs. prior consensus of $0.14).”
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