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ARM crashes on Q3 warning

'Visibility could be affected'

The trouble with ARM Holdings is that it has to keep doing the spectacular numbers to justify a spectacular P/E ratio. One stumble and the share price, so geared to spectacular success, is hammered.

So it proved today with ARM shares falling as much as as 64 per cent in morning trading following a trading update/sales warning for Q3. The company said it has missed its analyst forecasts by around 12 per cent, and it warns that it sees no sign of a significant upturn.

The company is a bit late with the warning - after all, Q3 ended on Monday. But it attempts to deflect criticism on this score with the comment:

"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."

So there you have: ARM continues to make good profits from its chip designs, used mostly in mobile phones and PDAs, along with the sales of sundry development systems and services. And it remains profitable and cash generative in this, the worst of times. The company expects to end Q3 with £121.7 million, compared with £115.4m in Q2. ®

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