ARC Acquires Sonic Focus

SAN JOSE, Calif., and ST. ALBANS, England, February 12, 2008  – ARC International (LSE: ARK) today announced that it has acquired Sonic Focus, Inc., a privately held U.S. company located in Northern California.  Sonic Focus provides award winning audio enhancement technology that already has achieved design wins in a number of desktop PCs and laptops, and currently is designed into a wide range of consumer electronics products.  Sonic Focus’s products recreate studio quality audio when audio fidelity has been degraded due to digital compression.  Sonic Focus’s products are widely considered to have the most robust audio solutions for music enthusiasts, and bring natural surround sound to digitally compressed stereo files.  See companion announcement released today, February 12, 2008 from Sonic Focus about the integration of the two companies’ products.

Together with technologies from previous acquisitions, Sonic Focus’s audio enhancement software builds on ARC’s ability to bring higher quality audio and video solutions to companies throughout the consumer electronics value chain.  This strategy was outlined at the recently held ConfigCon™ Silicon Valley developer conference where 1,000 people registered to listen to ARC and some of its key partners, including Intel and Microsoft, talk about “Enabling the YouTube Generation.”  A highlight video is available at: www.youtube.com/watch?v=yW3rlIf0q9c

For financial year 2007, Sonic Focus operations were breakeven with approximately £600,000 ($1.2 million) in revenue.  The acquisition is not expected to negatively impact ARC’s 2008 operating results.  Sonic Focus has an established customer base of “Tier 1” OEMs globally and is gaining significant traction in the audio post-processing market. 

Carl Schlachte, president and CEO of ARC International, said, “The acquisition of Sonic Focus enhances ARC’s strategy of increasing its customer base and revenues by delivering one of the highest value elements of an audio enabled device – sound enhancement software.  Sonic Focus’s established revenue stream and growing customer list of leading consumer OEMs will complement ARC’s financial and product goals.”

Tom Paddock, president and CEO of Sonic Focus, said, “The combination of Sonic Focus and ARC will offer new, more powerful solutions to OEMs and their semiconductor suppliers worldwide.  Furthermore, this combination will expand our reach to a broader range of embedded consumer devices thereby bringing the revolution of better music fidelity to a greater number of consumers.”  Mr. Paddock will join ARC as the Vice President of Audio Systems.

The consideration for the acquisition is £3.3 million ($6.5 million), of which £750,000 ($1.5 million) will be paid in ARC International ordinary shares over two and a half years based upon achievement of certain milestones.  The cash element will be paid from existing cash balances.  After the transaction, ARC’s cash balances are £18.7 million ($37 million).  Sonic Focus had gross assets of approximately £93,000 ($185,000) and generated profits of £42,000 ($83,160) for the year ended September 30, 2007.  These results were unaudited as there is no requirement for such audit of a privately held company in the U.S. 

 To satisfy the equity element of the consideration, application will be made to the UK Listing Authority and the London Stock Exchange for approximately 2,738,000 ordinary shares of 0.1p each to be admitted to trading on the London Stock Exchange prior to their issuance.  The ARC shares will be issued 15 and 30 months after closing.  The number of shares to be issued was calculated with reference to ARC’s 10 day average closing share price prior to the completion of the acquisition of Sonic Focus on February 11, 2007, and converted into U.S. dollars using the average interbank exchange rate over the same 10 day period. 

About Sonic Focus, Inc.
Sonic Focus is a leader in digital audio enhancement technology.  The company’s goal is to bring music enthusiasts closer to the original performance with the highest-quality audio experience possible.  Sonic Focus began in the 1990’s by working with pioneering musicians to improve the quality of their live concerts being streamed via the Internet.  Sonic Focus’s artisans and engineers draw upon decades of close partnerships with music icons such as Jerry Garcia, Cher, George Winston, Will Ackerman, Carlos Santana, Grateful Dead, and Windham Hill.  Their work also includes partnerships with media companies such as Clear Channel Communications and the Walt Disney Company.  Additionally, Sonic Focus has an audio mastering studio where products from OEM companies can be optimally tuned to achieve the maximum sound experience at price points for consumer products. 

Sonic Focus is working to spread the revolution of higher quality audio beyond PCs and laptops to devices such as MP3 players, cell phones, in-car audio and home theater systems.  This is considered to be one of the hottest trends in consumer electronics today.  At the 2008 Consumer Electronics Show (CES) in Las Vegas, Sonic Focus and its OEM customer Bel Canto won an award for their jointly branded iPod docking station the “ULTRA-DOCK.”  Hailed as the “premier iPod docking solution” for the consumer audiophile market, it converts ordinary digital compressed stereo audio to theater-quality fidelity.  A video interview with Sonic Focus’s CEO Tom Paddock at CES is available below

Other jointly branded consumer products from Sonic Focus’s OEM customers include Intel’s Audio Studio, which ships as a bundled software package with Intel® Desktop Boards.  More information is provided at: www.intel.com/go/audiostudio

Further Information on the Acquisition of Sonic Focus
Slides providing additional overview of the acquisition are available on ARC’s Website at www.arc.com.  On Tuesday, February 12, 2008 at 15:00 GMT, ARC will hold a conference call for investors and financial analysts.  The conference call number is +44 1452 562 815 from the United Kingdom and +1 866 629 0054 from the United States.  An audio replay of the call also will be made available from 18:00 GMT starting the afternoon of February 12, 2008.  To access the replay, dial +44 1452 550 000 from the United Kingdom or +1 866 247 4222 from the United States.  The access code for the replay is 34931066.  Additionally, further information about the acquisition as well as ARC’s full year 2007 financial results will be disclosed on February 20, 2008.  A meeting will be held in London for analysts.  Interested parties should contact Financial Dynamics or ARC International for more information.

About ARC International plc
ARC International is the world leader in configurable multimedia subsystems and CPU/DSP processors.  Used by over 140 companies worldwide, ARC’s configurable solutions enable the creation of highly differentiated system-on-chips (SoCs) that ship in hundreds of millions of devices annually.  ARC’s patented subsystems and cores are smaller, consume less power, and are less expensive to manufacture than competing products.

ARC International maintains a worldwide presence with corporate and research and development offices in California and St. Albans, UK.  For more information visit www.ARC.com.  ARC International is listed on the London Stock Exchange as ARC International plc (LSE: ARK).