Compared to last year's second quarter, revenue was up 21% to $105.5 million. However, that still fell short of analysts' $108.6 million estimate. Earnings jumped from 3.8 cents to 5.6 cents a share (factoring out acquisition-related charges from the most recent quarter's results), within the $0.06 per share analysts expected.
The operating margin was strong at 31.8%, and the company, after initiating a dividend in 2004, announced a share buyback program today.
However, one bit of bad news seemed to foil investors' expectations, perhaps accounting for today's 2.5% drop in share price. The company announced that it expects revenue to increase 15% to 20% this year. As recently as January, ARM was calling for 2005 revenue growth of at least 20%.
ARM is an interesting stock for two reasons. It has a solid and growing base of licensees such as Intel
Is ARM the Rodney Dangerfield of the semiconductor world, perpetually unable to get respect? That's my guess, given the stock's turbulent trading history. Missed expectations make investors gun-shy, and rightfully so. Companies like ARM are also subject to rapid-fire cycles in product innovation, providing potential for a change of fortune even among flyers.
But our electronic world is filled with ARM's licensed products. From the Apple
ARM, based on its growth prospects and relatively low multiple, is flying under investors' radar. Clever Fools should consider whether this company deserves a spot in their portfolio.
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Fool contributor W.D. Crotty does not own shares in any of the companies mentioned.