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ARM Q4 beats analyst expectations;

sees improved industry outlook 2004 -UPDATE

(Adding more on licensing, royalty revenues, acquisition of US' Triscend Corp)

LONDON (AFX) - ARM Holdings PLC, the UK microprocessor designer, said that fourth-quarter income before tax rose to 8.9 mln stg compared with 5.5 mln stg in the same period last year and said it sees an 'improved outlook' in the semiconductor industry this year.

The pretax profit figure compared with the consensus of analysts' forecasts of 7.3 mln stg.

Fourth-quarter product revenues expanded to 29.7 mln stg versus 28 mln a year ago.

Service revenues were unchanged at 4.3 mln stg.

Total revenues were 34.0 mln stg versus 31.7 mln in the previous quarter and 28 mln stg a year ago.

License revenues in the fourth quarter decreased marginally in sterling to 12.9 mln stg from 13.1 mln in the third quarter, ARM said.

Operating margin increased to 22.3 pct, up from 17.7 pct in the third quarter.

Tim Score, chief financial officer, said activity levels in the semiconductor industry and recent industry data indicate 'more favourable trading conditions' and an 'improved outlook' for 2004.

'It remains uncertain, however, as to how quickly these improved conditions will feed through to sustained levels of higher licensing activity for ARM,' he said.

With approximately 90 pct of ARM's revenues being earned in dollars and costs being predominantly sterling denominated, the ongoing weakness of the US dollar continued to impact results, he warned.

The effective average exchange rate in the fourth quarter was 1.68 usd compared to 1.59 in the third quarter, thereby having a negative impact of approximately 1.9 mln stg on ARM's Q4 revenues when translated into sterling.

The gradual pick up in licensing activity seen in the third quarter continued in the fourth, ARM said.

Taking into account the 16 licenses for microprocessor cores that were

signed in the fourth quarter, a total of 51 licenses for microprocessor cores were signed in 2003, comprising 25 multi-use licenses and 26 per-use licenses.

Twenty-six new companies joined the ARM partnership in the year, bringing the total number of semiconductor partners at the end of 2003 to 128, the company said.

ARM said today it has entered into an agreement to acquire Triscend Corp, a company specializing in ARM core-based microcontrollers, for cash a price of 13.2 mln usd plus further cash consideration of up to a maximum of 1.8 mln usd, depending on the achievement of certain revenue targets in the first twelve months after completion of the acquisition.

ARM views the microcontroller market as a 'key emerging market'.

Royalty revenues earned in the full year were 44.3 mln stg on 782 mln units shipped, up 65 pct and 71 pct respectively on a year ago.

Royalty revenues recognised in the quarter were 12.8 mln stg on 236 mln units shipped, up 64 and 86 pct respectively on a year ago.

oliver.wagg@afxnews.com

ow/slm/rn

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