ARM cuts jobs after first dip in sales

ARM cuts jobs after first dip in sales
By John Walko, CommsDesign.com
October 15, 2002 (12:05 p.m. EST)
URL: http://www.eetimes.com/story/OEG20021015S0008

London, UK — UK chip designer ARM Holdings has succumbed to the downturn in the industry and announced its first ever fall in quarterly sales. It is also laying off about 10% of its workforce, again the first time the company has had to reduce its headcount.

Two weeks ago, the Cambridge based group warned that its profits for the year would be well down on expectations (see October 2 story).

Along with the announcement of its third quarter results company said it would take a £2m ($3m) charge in the fourth quarter and lay off about 100 people, bringing the level back to the 700 it employed a year ago. The reduction would lead to annual savings of £5m.

The company said it is taking a "cautious" view of the short to medium term. "Although the current run rate of royalty revenues, sales of development systems and service businesses, together with contracted revenue alre ady in the backlog, give us reasonable visibility of future earnings, the timing of the closure of new license deals is unpredictable", the company said in a statement.

Based on the third quarter 2002 run rate of £33m, it predicts that revenues are likely to be "flattish" for the foreseeable future.

For the three months to September 30th, ARM had sales of £33.3m, down 23% on the second quarter (£43.2m) and 11% down on the third quarter of 2001. However, the company continues to be profitable, having made £8m in the third quarter, down from £12.9m for the corresponding period last year.

"Even though the length and severity of the current semiconductor industry downturn has now impacted ARM's financial results, we are confident the company's business model remains robust and resilient. We will continue to focus on strengthening our competitive position, building on our leadership in the wireless market and increasing our penetration of newer markets", said Warren East, ARM's chief executive office r.

The company denied it was losing any business to its competitors, and suggested it may even be strengthening its competitive position. This week, it launched its ARM1136J-S core, the first in its ARM11 microarchitecture that is based on the ARMv6 instruction set. Texas Instruments, Qualcomm and LSI Logic have already announced they will use the ARM11 core in next generation wireless or entertainment devices.

However, the company admitted earlier this month that its sold just eight licenses during the second quarter, compared to 27 for the previous three months. Licence revenues were £17.9m for the third quarter, representing 54% of total sales, compared to £25.7m, or 60% of revenues, in the second quarter of 2002.