ARC Announces Consolidation of Software Engineering Teams and Provides a Trading Update

Consolidation of Engineering Teams

ARC International plc, (LSE:ARK), a world leader in semiconductor and software technology licensing, today announces that it is to consolidate its software engineering teams to promote synergies in software product development and reduce the overall cost structure of the Group.

ARC’s engineering facility in Ottawa will close and it is expected that a portion of the Ottawa-based RTOS and Protocol Software group will be relocated to Santa Cruz, California, where ARC’s Software Development team is headquartered. The Elstree operations in the UK and the Nashua, New Hampshire engineering locations will not be affected.

The transition will begin immediately and ARC expects it to be completed by January 2003. As a result of these initiatives and a small number of other redundancies, the Company will take an exceptional charge in the range of £2.4 million, of which approximately £1.4 million will be charged to the cash balance. The charge will cover reduction in the workforce, closure of facilities, disposal of equipment and goodwill write-offs. Overall, the Company expects headcount to decrease by approximately 7%.

Today’s announcement will neither delay the development of new products nor affect the support and service provided for ARC’s software customers.

ARC International will be announcing third quarter results for the period ended 30th September 2002, on Thursday 24th October 2002 at which time further details will be given.

Mike Gulett, CEO of ARC International commented:
“We believe that our decision to relocate our software engineers into one facility will improve our ability to provide optimized, integrated SoC IP solutions, will generate significant cost savings, and will move us closer towards our goal of reaching profitability.”

Trading Update
Due to a 6% adverse impact from exchange rate movements and the deferral of several deals, the Company expects Group revenues for the third quarter to be slightly below market expectations. Prior to currency translation, with virtually all of the sales denominated in US dollars, the Company expects to report sales that are broadly flat to the prior quarter.

Management expects to close these deferred deals during the fourth quarter and is encouraged by the strong forward pipeline. The Company is therefore confident that its financial performance for the year ended 31 December 2002 will fall within the current range of published analyst forecasts.