Arc plunges on warning

July 6, 2001 Posted: 0806 GMT

LONDON (CNN) -- UK chip designer Arc said on Friday its losses would widen in the second quarter, sending its shares plunging 24 percent.

Arc said it expects to post a £6.5 million ($9 million) loss in the three months to June 30 compared with a £4.4 million loss in the first quarter.

Revenue was expected to fall to £3.6 million from £3.7 million.

"The slowdown in the semiconductor industry has resulted in customer hesitancy over concluding licence agreements," said Chief Executive Bob Terwilliger in a statement.

Arc, which listed on the London stock exchange last September, said its cash position remains strong with about £130 million in hand at the end of the second quarter.

Arc, whose customers include German chipmaker Infineon Technologies (FIFX) and U.S. chipmaker Texas Instruments (TXN: Research, Estimates), is the latest tech business to warn on earnings as the U.S. economic slowdown spreads worldwide.

By the end of the second quarter, total chip design licences had been increased to 87 from 56 customers, compared with 80 licences from 50 customers at the end of the first quarter.

"During the critical final days of the quarter, when normally many licensing agreements are concluded, a number of deals were not confirmed," said CEO Terwilliger. He said the companies concerned cited market uncertainty for not proceeding.

Companies such as Arc and its larger UK rival ARM Holdings (ARM) were normally thought to have a certain immunity from the effects of medium-term slowdowns as clients buy ahead for future investment.

One of Arc's main designs is Tangent, a processor that can be customised for use in a wide variety of products in telecommunications, voice and data networking and consumer electronic.

Arc (ARK) shares were last down 24.4 percent at 48 pence in London on Friday, compared with 475 pence on their first day of trading last September 21.

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