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TWST: Can we start with an historical sketch of ARM Holdings (London: ARM.L) and an overview of the how the company is positioned currently?

Mr. Score: We are a designer of intellectual property for microprocessors predominantly. We then license that intellectual property to companies in the semiconductor industry and we now have north of a 112 partners who license technology from us. They then manufacture chips using that technology, and when they sell those chips to system companies and OEMs, we are paid a per unit royalty. That business model is essentially unchanged. Through the 90s, growth was driven by the wireless industry and the proliferation of mobile handsets. Most of ARM’s commercial effort was targeted at the mobile handset industry up till about 1998. From 1998 onwards, we started to divert significant commercial resource towards seven or eight other end markets , which we believe will all gradually and at different paces, develop digital devices d Over time, those devices are going to be increasingly based on 32-bit microprocessors, which is our sweet spot. That was the route the mobile handset sector went down first, but if you look at the other sectors like imaging, networking, mass storage, automotive, consumer entertainment -- they are all gradually moving from 4 and 8-bit microprocessors through to 32-bit. As they do, we believe we are well positioned to benefit from that migration.

TWST: How have you maneuvered the company during this period while also making sure you’ll be well positioned when the tide changes?

Mr. Score: Well, I think the first thing to say the current downturn has not impacted the long-term prospects for ARM. Arguably it may have slowed it down, but what actually happens in these difficult times is that the stronger companies get stronger and the weaker ones get weaker. Competitively, we are confident and we are in a much stronger position now than we were when the industry entered this downturn. Now, that doesn’t mean to say you can ignore market conditions and clearly you have seen in the second half of last year, we did have to adjust our cost base to be consistent with our realigned short-to-medium term revenue expectations. So, in autumn last year we reduced our work force by 12%, which enables us to continue investing in innovation in the future at the same absolute level that we did in 2002. And it means that we will, in the short term, be generating margins of 15-20% rather than over 30%. But the key for us is this is a very long-term story. The migration of the end markets to 32-bit microprocessors is an inexorable process that’s going to go on over a very long period. Therefore, the key for us is not be derailed by short-term market conditions.

TWST: What do you see as your main objectives for the next 12 to 18 months?

Mr. Score: The main objective of the company is to continue to build market share in all of the sectors we target, as they go increasingly towards 32-bit microprocessors, moving us, in terms of market share, towards where we are in wireless. At the same time of course, we will be working hard to maintain and further build on our wireless share.

TWST: Can you elaborate on why ARM is particularly well-positioned to benefit from this trend?

Mr. Score: It is really because ARM has gradually established itself as the global standard for32-bit microprocessors. If you look at the component elements of the system-on-chip, there are a number of components and a number of companies who contribute towards the development of a system-on-chip. Apart from the microprocessor core, you have the operating system; you have memories, you have the EDA vendors. And what ARM has done over time, is build, if you like, an eco system around the microprocessor core. That means that our core is optimized with the other components that are included in the chip. None of our competition can offer that.