ARM earnings power ahead

October 15, 2001 Posted: 0743 GMT

LONDON (CNN) -- ARM Holdings, Europe's biggest chip designer, said third-quarter profit rose 22 percent from the sale of new licences to use its technology.

The company based in Cambridge, England, which earns money from licensing designs and royalties for the use of semiconductors in mobile phones, handheld computers and cars, has seen its shares drop more than 40 percent this year.

ARM has fallen victim to tumbling global equity markets and a raft of profit warnings from chip makers, such as STMicroelectronics, and Infineon Technologies, as a U.S. economic slowdown cripples European and Asian growth.

Net income rose to £8.8 million ($12.8 million), or 0.9 pence a share, from £7.2 million pounds, or 0.7p, in the same period a year earlier. Revenue rose 42 percent to £37.6 million.

On a pretax level, ARM (ARM) posted a 46 percent jump to £12.9 million in the three months to September 30. That beat market consensus forecasts for pretax profit of £12.9 million, according to a poll of analysts by Reuters. The same analysts expected revenue for the third quarter of £36.5 million.

"Despite difficult market conditions in the electronics industry, our business continues to deliver strong performance and we continue to experience high demand for our products and services," said Robin Saxby, ARM's new executive chairman.

ARM designs chips that are used by Intel (INTC: up $0.51 to $25.02, Research, Estimates) and Nokia, to power mobile phones, hand-held computers and advanced Sony Gameboy and Playstation video-game devices.

The chips are in hot demand because their reduced instruction set computer (RISC) technology is cheaper to design and produce, using  fewer transistors and allowing higher speeds than conventional chips.

The company said it was well placed to make a strong start in 2002. Europe's third-biggest chipmaker Philips Electronics will report earnings on Tuesday, while the biggest chip maker in the region France's STMicroelectronics (PSTM) issues its results on Thursday. Both will be looked at closely for any sign of recovery in the industry.

ARM shares rose 2.7 percent to 306 pence in early London trade, as European equity markets opened in negative territory.             

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