3 October 2002 Semiconductor designer ARM Holdings has delivered its first ever profits warning after the downturn in the technology sector finally caught up with the company.

For the quarter to the end of September 2002, ARM said it would deliver revenues of about £33 million (€52.5m), compared to sales of £37.6 million (€59.8m) in the same quarter a year ago. Analysts had expected revenues of about £44.5 million (€70.8m) for the company’s Q3 2002. The company had bucked the downward trend by delivering 17 consecutive quarters of sales growth.

ARM also slashed its pre-tax profit forecast to about £8 million (€12.7m), down 38% compared to the same period in 2001 – and around half of what analysts had forecast.

The news from ARM – which designs embedded chips for consumer electronics, handheld computers and mobile devices – suggests that the semiconductor industry is struggling to pull itself out of recession and that suppliers are continuing to cut back on research and development.

CEO Warren East said that most of the company’s customers had been expecting an upturn in demand for their products in the second half of 2002. However, this demand had failed to materialise and some had even reported deteriorating conditions. He added, “The semiconductor industry is experiencing it worst ever downturn.”

ARM’s profits warning sent its stock crashing. Yesterday, ARM’s share price fell by two-thirds to 47 pence (€0.75), wiping nearly £800 million (€1.3 billion) from its market capitalisation. In early 2000, the company’s shares had been worth more than £10 (€15.9).