Arm Holdings (ARM) and CSR (CSR) both delivered strong third-quarter results. Investors were more immediately excited by Arm as its share price shot up more than 7 per cent after the chip set designer posted a 22 per cent rise in pre-tax profit to £68.1m on revenue of £144.6m and talked of adding diversity to its revenue stream. But its shares have surged which makes CSR, ahead of a cash return, better value.
"We've got strong momentum in royalty revenue, volume shipments and licensing," said Warren East, Arm's chief executive. "Our backlog is at a record level." A 27 per cent jump in royalty revenue, to £106.8m, was the backbone of Arm's strong quarter, outpacing industry growth of 4 per cent. Arm's leap in royalty sales was propelled by deeper penetration of its more expensive Cortex-A chips and the growing popularity of its Mali-based processors used for graphics. Average royalty revenue per chip increased to 4.9¢ from 4.4¢.
Arm may be associated with smart phones, but of the 2.2bn Arm-based chips shipped during the quarter, half were to the non-mobile segment. "We're making strong progress in digital TV, set-top boxes, microcontrollers and smart cards," says Mr East.
Wireless technology specialist CSR grew its adjusted operating profits by 33 per cent to $32.2m (£20.1m) on revenue of $282.7m, beating Canaccord Genuity's estimates of $27.8m and $269.7m. The company continues to make good progress in shifting the revenue mix from low-margin components to higher-margin solutions from its Platforms division.
Joep van Beurden, chief executive, sees voice and music - along with auto 'infotainment' - as two main growth areas for Platforms during 2013 and 2014. "Streaming music and audio to devices, using Bluetooth [a short-range radio technology], is something we can provide the whole solution for," says the CSR chief executive. "We hold about 90 per cent share in the high-end device market." CSR has given guidance of $235m-$255m for the fourth quarter, well above Canaccord Genuity's forecast of $224.4m.
CSR formally completed the sale of its handset connectivity business to Samsung on 4 October. Not only will that result in $285m being returned to shareholders, but annual operating costs will fall by $45m following the transfer of 300-plus CSR staff to the Korean manufacturer. And the company remains highly cash generative, forecasting a year-end cash balance of $300m even after the return of cash.
