ARM in profits probe twist

ARM, the Cambridge-based chip maker, is set to face an investigation from the Financial Services Authority (FSA) over its surprise profits warning last week.

Shares in the once high-flying company spiralled down 68 per cent to end at 42p after it warned of a shortfall in profits because of delays signing contracts. They stood at over £10 two years ago when ARM was in the FTSE 100 index.

US shareholders are angry that ARM gave no indication of its problems when it met with them in an investor road- show in New York 10 days ago.

The meetings were arranged by Morgan Stanley, ARM's stockbroking adviser, and involved Robin Saxby, the group's executive chairman, and Tim Scorer, the recently appointed finance director. They followed similar meetings in London in September.

Among the funds that attended were the group's largest shareholder, Capital Group, which has bought more than 27 million ARM shares in recent weeks and is now sitting on a loss of more than £50m; Janus, which has bought more than 14 million shares this year and is facing losses of nearly as much; and Fidelity, one of ARM's biggest investors.

Shareholders who attended the meetings were furious when only four days later, on Wednesday, ARM issued its warning.

Mr Saxby told The Independent on Sunday that the meetings were to update investors on the group's long-term prospects and that no financial information was disclosed. "We still thought at the time that we were going to meet our numbers. Our investors are angry but we have spoken to them and we don't think we have any issues now."

ARM is to make a further financial statement next week, when it hopes to have good news about its contracts.

Some shareholders are still unhappy and are planning to make a complaint to the FSA.

"This is similar to the British Energy case," said one investor, referring to the ongoing FSA probe into a conference call by a senior director of the ailing nuclear energy company in mid August. The firm had said it was financially sound but three weeks later it said it would go into administration without help from the Government.

FSA investigators believe there could be grounds for scrutiny but are waiting for a complaint to come from a shareholder before taking further action.