Mixed day for corporates with Sky and Tullow down but Reckitt risingA day after Apple became the first company to be worth more than $700bn, key supplier Arm has seen its shares boosted by better than expected results.The chip designer reported a 25% rise in fourth quarter profit to £118.9m on revenues up 18%, helped by strong growth in licensing and growing royalties from the likes of Apple. Full year profits rose 13% to £411.3m. It also said the current year had begun strongly, although at a slower growth rate:We anticipate that total group dollar revenues for the first quarter will be up about 10% year on year, based on strengthening royalty revenue growth and our expectations of the profile of licence revenue through the year.2015 will bring exciting opportunities and challenges as Arm invests in new products and technologies, and continues to establish itself in competitive new markets.Arm has delivered again on licenses, up 30% year on year to $139.5m versus our $126m (consensus $128.2m), with backlog also up 5% sequentially.The outlook is for licences to revert back to around 5-10% growth and we expect a flat first quarter 2015 performance. Implied royalty progression of around 20% is in line with our estimates. We see the net impact as a 2%-5% uplift to consensus 2015 earnings per share.Results are superseded by a proposed all-share merger with Interxion and a cash return, both of which should be taken positively. That a cash return was coming at all was doubted, and the quantum is better than we expected. A merger offers attractive synergy potential, although exactly how numbers are derived needs further analysis. Opinion will polarise on whether this is a product of weakness or a great opportunity to gain scale. Full year results and guidance are in line. Continue reading...
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