Shares digital

ARM Holdings (ARM) – Finals PTP: £48.2m (£57.0m) Divi: 2p (1p)

Management may have doubled the dividend payout to 2p, but this was of little consolation to investors as shares in the chip design expert crashed to their lowest level in over three years, following a disappointing outlook statement.

ARM’s shares plunged 20% to 94.25p after chief executive Warren East stated he expected revenue growth in 2008 to at least match the 6% seen in 2007, when measured in US dollars.

The impact of East’s caution, which he primarily attributed to an uncertain economic environment and poor visibility with regards to the broader semiconductor industry cycle, was exacerbated by a second consecutive poor quarterly performance from the Physical Intellectual Property (PIPD) division.

Licensing and royalty income again both fell year-on-year at the PIPD unit, whose origins lie with 2004’s $913 million acquisition Artisan, a deal which met with considerable investor scepticism at the time it was forged.

ARM’s shares fell 20% in August 2004 when it first announced plans to buy Artisan, as investors argued the Cambridge firm was massively overpaying for its Californian target. The latest poor showing means Artisan has yet to justify the lofty price tag, despite a management overhaul and substantial additional investment last year.

At least royalties at the Processor division reached record levels in the quarter, rising 19% to a 828 million units. For the year as a whole, ARM’s partner’s shipped a mind-boggling 2.9 billion units featuring the £1.3 billion cap’s designs.

Shares says: Still the clear leader in its field and the valuation is more now palatable.

by: Russ Mould