ARC attempting a new trajectory

ARC attempting a new trajectory
By Darrell Dunn, EBN
October 26, 2001 (2:47 p.m. EST)
URL: http://www.eetimes.com/story/OEG20011026S0075

Attempting to battle through the semiconductor slump and facing mounting losses, ARC Cores Inc. is refocusing after the departure of three vice presidents and the forced resignation of its chief executive.

The licensable-IP company has refined its strategy to concentrate on three primary markets-wireless, wired networking, and consumer electronics. And it is counting on its interim chief executive, John Stockton, to help stem the flow of losses.

Although revenue for the first half of 2001 more than doubled, to $10.3 million, the company reported a net

loss of $15 million compared with a net loss of $7.2 million through the first half of 2000. ARC is scheduled to announce its third-quarter results next week, but the company has previously advised it expects revenue of about $2.8 million.

Losses were anticipated as a normal course of business for a new company, but the depth of the semiconductor slump forced ARC to revisit its strategy an d reduce its workforce. Three vice presidents resigned, including Jim Turley, who was serving as senior vice president of technology and strategy.

In September, the board forced the resignation of chief executive Bob Terwilliger. Stockton, who had been chairman, was named interim chief executive.

"We kind of outgrew Bob, which is unfortunate, but that's what happens," Stockton said last week from his office in Austin, Texas. "Over a period of time, we came to need a less entrepreneurial management style, and more of a hands-on operational management. Bob and some of the other guys were perfect for getting the company going and getting it public. But execution is a thousand details all dealt with flawlessly, and a lot of times the big-picture guys are not great at dotting the I's and crossing the T's."

Stockton said he hopes to eventually be named ARC's permanent chief executive, although the board is currently reviewing options and there has been no time table set for naming Terwilliger's replac ement.

Turley, who has established a research firm in San Jose, said the executive turn-over at ARC is not an unusual event for a company that is growing past its initial stages, and believes that Stockton can do a strong job in leading ARC in the future.

"[ARC] had grown like mad over the past year and a half or two," Turley said. "We acquired three companies, went public, grew headcount, expanded into five cities. In the midst of all that, the economy was going south. ... When you get brand-new public shareholders crying for blood, the decisions start to get tough. The executive staff starts to disagree with each other, and in general, the guy on top wins. In this case, that was John Stockton."

ARC has been "a lot more successful than most people think, but they've done a rotten job of getting their story out," Turley said. "The technology is solid, and they're still getting leads into doors. Everything fundamental is still in place."

Founded in 1996 and headquartered in Elstree, England, A RC has quickly established itself as one of the most successful of the legion of licensable-IP companies established in the past five years. ARC now has 58 licensees, including 13 signed in the past year, and plans to announce two additional licensees in the next few weeks.

Recent design wins include an implementation of 16 ARC processor cores on Internet Machines Corp.'s NPE10 network processor, use in Conexant Systems Inc.'s Raptor II chip for digital cameras, and with QLogic Corp. for use in storage area network infrastructure components.

Offerings by ARC include the ARC-tangent-A4, a 32-bit RISC/DSP core; a Bluetooth system-on-a-chip solution; ARCcompact, a 16- and 32-bit instruction set architecture; and a 10/100Mbit/s Fast Ethernet controller soft core.

"We had to rethink our strategy and make sure we are doing the right stuff and more narrowly focus our strategy," Stockton said. "We had to consolidate some of the efforts internally so that we had better economies of scale. We've gone throu gh a number of changes and we're actually doing just fine now. It has required a lot of [customer] handholding. Everybody has had a reason to pick up the phone, but surprisingly, one phone call or visit and the issues seem to be completely behind us. It hasn't been easy, but it's been a very manageable task, as it's turned out."