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ARM Holdings plc Q3 Trading Update

02 October 2002

CAMBRIDGE, UK, 2 October 2002--ARM Holdings plc [(LSE: ARM); (Nasdaq: ARMHY)] announces today a period-end trading update for the three months to 30 September 2002.

In our Quarter 4 2001 earnings announcement in January 2002, we indicated that if the downturn in the semiconductor industry persisted our visibility could be affected. In our second quarter earnings announcement in July, we referred to continued challenging market conditions in the industry. These conditions have deteriorated further in the third quarter, resulting in the deferment of investment decisions by our partners and therefore a slowdown in licensing activity. At the same time, the weakening US dollar is also impacting our reported results.

As a consequence, revenues for the three months to 30 September 2002 are expected to be approximately £33 million. The foreign exchange impact on reported revenues is expected to amount to £2 million. Pre-tax profit for the period is expected to be approximately £8 million.

The company continues to generate cash with cash balances likely to increase to approximately £121.7 million at the period end, compared with £115.4 million at 30 June 2002. We continue to manage our working capital rigorously and accounts receivable is projected to fall to approximately £28.1 million at 30 September 2002 from £40.2 million at 30 June 2002.

The slowdown in licensing activity in the third quarter has given rise to a reduction in the backlog at the end of September. Deferred revenue, being that portion of the backlog that has been invoiced to partners but not yet recognised in the profit and loss account, is projected to decrease, as expected, from £17.4 million at 30 June 2002 to approximately £13.8 million at the end of September.

Whilst our sales pipeline and backlog of signed contracts give us reasonable visibility in our business, the persistent difficult market conditions mean that the timing of the closure of licensing deals is unpredictable. Although the fourth quarter is usually stronger than the third quarter, we do not anticipate any significant upturn in business activity before next year.

Key long-term growth indicators for the company remain healthy, supported by our partners' commitment to ARM's product roadmap and extensive third party network which supports ARM technology. New and existing partners continue to choose the ARM architecture for increasing numbers of projects. In addition some partners who are taking action to reduce their R&D costs have taken decisions to support only one architecture, being ARM. OEMs adopting the ARM architecture as their platform of choice are also driving ARM's penetration of sectors outside the wireless market.

Warren East, Chief Executive Officer, commented:
"The semiconductor industry is experiencing its worst ever downturn. Whilst ARM has continued to achieve robust results to date, the persisting challenging market conditions have eventually caused some of our partners to delay decisions about licensing our technology. Our strategy and confidence in medium and long term opportunities for this business remain unchanged despite the current market difficulties. We continue to focus on our profitability and long term growth drivers and will manage our cost base accordingly."

Sir Robin Saxby, Chairman, commented:
" We are confident that the progress ARM has made in becoming the significant global standard architecture is enabling the company to strengthen its competitive position further as these difficult market conditions persist."

Tim Score, Chief Financial Officer, added:
" ARM's continued cash generation and strong balance sheet enable us to continue to invest in the future growth of the business during these challenging times. Rigorous working capital management and the maintenance of a cost base which balances long term growth opportunities and short term trading pressures remain priorities for the business."


Third quarter results to 30 September 2002 will be released on 15 October 2002.

There will be a live audio webcast at 09:30 hours BST (04:30 hours EST), accessible via the Investor Relations section on ARM's website. An archive of this webcast will be available until 15 October 2002 at www.arm.com.

 

CONTACTS:
Sir Robin Saxby, Chairman
Warren East, Chief Executive Officer
Tim Score, Chief Financial Officer
ARM Holdings plc
+44 (0)1223 400 400

Sarah Marsland/Sarah Basden
Financial Dynamics
+44 (0) 207 831 3113





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