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Technology Stocks : ARM Holdings (Advanced RISC Machines) plc. -- Ignore unavailable to you. Want to Upgrade?

To: nigel bates who wrote (642)	10/15/2002 12:30:41 PM
From: Jim Oravetz	Read Replies (1) \| Respond to of 912

ARM Holdings to Cut Jobs As Pretax Profit Falls 38% DOW JONES NEWSWIRES LONDON -- ARM Holdings PLC Tuesday posted a 38% fall in pretax profit and announced a 10% cut in its work force. The United Kingdom chip designer warned that its cautious revenue outlook will continue for the medium term. ARM reported a pretax profit of £8 million ($12.5 million or €12.6 million), down from £12.9 million in the third quarter of last year. Sales fell 11% to £33.3 million from £37.6 million. The company, which designs the microprocessors used in 70% of the world's mobile phones, added little to what it said in a profit warning Oct. 2 -- its first ever -- although it extended its grim outlook for a flat fourth quarter. "Fourth-quarter revenues will be flattish compared to the third and we don't expect the first quarter to be any better," Chief Financial Officer Tim Score said, adding that "flattish" meant a change of up to plus or minus 10%. In early afternoon trading, ARM shares fell 2.7% to 45 pence in London. Immediately after the company's profit warning Oct. 2, the shares shed more than 60% of their value. Merrill Lynch cut its rating on the stock to "neutral" from "buy," saying the rollout of its ARM11 micro-architecture semiconductor technology is likely to be slower than intended, as most licensees will wait to see the return on investment benefits of the new technology or simply don't have the cash to spend on new architecture. Mr. Score said five partners have signed up to ARM11 technology, but it is unclear when others will follow. "It's more protracted than we envisaged," he said. Numis Securities cut forecasts on the back of the earnings statement and said sentiment could worsen in the fourth quarter on the back of costs of new products. WestLB Panmure analyst Robin Hardy said he will maintain his "underperform" recommendation on the stock with a price target of 40 pence. He added that if the sector improves, ARM will benefit. Mr. Score said more than 90 jobs will be cut, leaving the company with around 700 employees, and Chairman Robin Saxby said reductions will be made at all levels of the business, as well as inside and outside the U.K. The job cuts are expected to cut £5 million from the company's cost base a year and will result in a £2 million exceptional charge in the fourth quarter. ARM said gross margins fell to 89% in the third quarter versus 93% in the second quarter due to the proportion of licensing revenues being smaller. Mr. Saxby said he expects gross margins to be around 88% from now on. Mr. Saxby said ARM is gaining market share and will continue to invest in research & development. "We expect to emerge from the downturn even stronger," Mr. Saxby said.