Chip designer ARM cuts 10% of workforce

The chip designer ARM Holdings yesterday unveiled plans to cut 10 per cent of its workforce, just two weeks after warning its third-quarter profits would be around half the forecast level.

The Cambridge-based group plans to cut around 80 jobs by the end of the year, at a cost of about £2m, in an effort to wipe £5m a year off its cost base. It had previously insisted there would be no redundancies among its 800-strong workforce after imposing a hiring freeze. The move sparked market fears an upturn in trading was still some way off and shares in ARM closed down 4 per cent at 44.5p. "A 10 per cent staff cut suggests recovery is not imminent," said analysts at UBS Warburg.

ARM added to the pain by reiterating that revenues were likely to be "flattish" for the "foreseeable future" after customers dramatically reined in their spending. "We are taking a cautious view of the revenue outlook in the short to medium term," the company said, adding the timing of closing new license deals remained "unpredictable".

It confirmed yesterday that pre-tax profits were £8m in the third quarter to 30 September, well beneath the £12.9m profit it made in the same three-month period a year before.

ARM, whose chip technology is used in mobile phones and other devices, had previously enjoyed 18 consecutive quarters of growth. Revenues in the third quarter, it said, were £33.3m, a 23 per cent drop from the second quarter and an 11 per cent drop from the same quarter a year ago.

The company reiterated that its long-term growth indicators remained "healthy".

"Even though the length and severity of the current semiconductor industry downturn has now impacted ARM's financial results, we are confident that [our] business model remains resilient," said Warren East, chief executive.