ARM allays investor fears

ARM, the microchip technology developer, managed to dispel fears of a lull in orders yesterday, convincing investors that sales of its leading-edge designs would protect the company from any cyclical downturn among chip makers.

The company's results for the third quarter missed market expectations because of fluctuating currency exchange rates, higher investment costs and a weak performance from its development systems business. Negative comments from ARM's rivals CSR and Wolfson had also left investors concerned about the semiconductor sector.

Yet a confident outlook from ARM led to an 8 per cent rise in its shares, despite an initial 4 per cent fall in the stock after its third-quarter results. One analyst described the turnaround as a "reversal of scepticism".

Lee Simpson, an analyst with Evolution Securities, said: "Management has showed the sort of confidence that has been missing for awhile."

Warren East, ARM's chief executive, said he expects a strong fourth quarter to offset the third-quarter disappointment as its investment in new staff and bulking up its high-end technology platform pays off. The company has added 200 staff so far this year.

Mr East said its success in signing up customers such as IBM and Samsung for high-end technology provides the company with a platform for growth and that it expects to stabilise its cost base in 2007. "Our leading-edge technology is being adopted, which is very encouraging," he said.

ARM appears to have dispelled scepticism around its acquisition of Artisan in 2004. "Only 12 months there was still a lot of uncertainty about it and a lot of questions being asked. I feel a lot of those questions have been answered," he said.