CNET también está disponible en español.

Ir a español

Don't show this again

Tech Industry

ARM warns, stock slides

The British chip designer cautions that revenue and earnings fell well short of expectations for the third quarter, sending its stock reeling.

British chip designer ARM Holdings warned late Tuesday that revenue and earnings fell well short of expectations for the third quarter, sending its stock reeling.

The company--which designs microprocessors for cell phones and handhelds--said revenue for the quarter ending Sept. 30 will come in at around $51.6 million (33 million U.K. pounds), while pretax earnings will come to $12.5 million, significantly down from revenue of $67.6 million and $25.35 million achieved in the second quarter. Unfavorable foreign exchange rates also impacted revenue by $3.13 million.

Earlier, the company said that business in the second half would remain largely consistent with the growth seen earlier in the year. ARM will report earnings officially on Oct. 15.

As a result of the warning, ARM's stock has dropped by around 64 percent. Currently, it is trading at around $2.26.

The decline comes as a result of the overall technology meltdown. ARM doesn't manufacture chips. Instead, it licenses its designs to chipmaker Intel, Texas Instruments and other companies for royalties and other fees. Chips based on the company's designs power about 70 percent of the world's cell phones and will become the dominant chip inside handhelds in the near future.

Chips from these customers aren't selling well, however, and many are deferring licensing deals.

"Whilst ARM has continued to achieve robust results to date, the persisting challenging market conditions have caused some of our partners to delay decisions about licensing our technology," said Warren East, ARM's chief executive, in a statement.

The picture won't get brighter until next year, the company added. Although the fourth quarter is typically stronger than the third, ARM said it does not anticipate a significant upturn in business activity over the next three months.