Arkle Resources Share Discussion Threads

[kiwihope] 14/11/2003 11:49

This was taken from ARMs latest results:

..............

LONDON (AFX) - Tim Score, finance director of microchip designer ARM
Holdings PLC, said he expects the improving trend in licensing activity to
continue into 2004.
Coupled with continued upward pressure on royalties, it should enable the
group to return to growth next year, said Score on a conference call.
"Licensing activity is on an improving trend, which we expect to continue,"
Score told reporters.

...............

We need to see a similar statement from ARK in January about Q4. If not then maybe we should start to get a bit concerned.

[kiwihope] 14/11/2003 11:45

Best we can hope for is good news from sector peers - that might rub off here a bit - though it hasn't to date!

I agree with your analysis knife but I guess there's nothing we small holders can do.

[the knife] 14/11/2003 10:29

guess they wont cut price given the cash per share levels, nor raise the price until management shake up the ship, give investors a clear target for profits

[nur0mancer] 14/11/2003 10:18

wow a full £257-worth of shares traded already, amazed the MM's haven't yet tried something on to generate a bit of interest

[the knife] 14/11/2003 09:52

first thing of course is to cut the staff costs/employee to sensible levels. such a move would be highly motivational

[the knife] 14/11/2003 09:43

playmaker, its all very well, but they need to convince investors they care about shareholder value to inspire a recovery in the share price. to do that they need to drive revenues and maintain a competitive cost base

based on my figures above they would need to cut staff costs by (1-56.6/84=) 33% to come into line with ARM, based on 2002 figures. and to meet ARM performance they would then need revenues of (201.1x182=) £36.6m, based on 2004 ARM forecasts

then perhaps ARC would be worth (36.6/149x 1139m=) £280m, based on relative revenue levels

regards

the knife

[playmaker] 13/11/2003 11:33

the key quiestion is really is this company fairly valued at 27.5 million as opposed to arm at over 1139 million??

[playmaker] 13/11/2003 11:08

yeah good points knife, I can imagine exsisting shareholders would feel a bit disgruntled, but I am seeying this from a buying point of view so my perspetive is slightly different - nevertheless excellent comments.

dontknowitall - interesting analysis of the price movements I have looked at this stocks price movements carefully, its what I go on and its one of only a few tech stocks that has not shown any recovery from the tech sell off of recent years. This suprises me at they are supposed to be a world leader

[dontknowitall] 13/11/2003 10:38

A different outlook...

I've bought these (second time around) in mid September and have been tracking the trades for this since the beginning of Sept.

Before I go any further, it is my decision on whether each trade is a buy or sell and I don't check all my entries thoroughly since I do this activity with many shares.

SO....ERRORS and OMISSIONS EXCEPTED...

The top net buying point since early Sept was net buying of around 2.4m with the lowest net selling point around -10m in mid Sept. The situation at the moment is net selling of -4.7m, having climbed from a recent trough of around minus 5.4m. This is the overall position and doesn't reflect changes in price.

I zero my spreadsheet with every change in price. What my spreadsheet usually tells me is that with net buying at a certain level, the market makers will up their price and with net selling at a certain level they lower the price. But with ARK, this has not been the case, until recently.

In mid(ish) October they lowered the price at net selling of around -50,000, but near the end of October this increased to net selling of -300,000 and the last two drops, net selling of -500,000.

They have recently upped the price at net buying of very little - around 15,000 and around 50,000 in mid-late October.

The situation today from the first five trades is that we (or more correctly the market makers) are -75,000 (net selling) from the last change in price.

I have a feeling the market makers are happy to buy in loads of stock in readiness for another rise down the road. Otherwise, I'm sure they'd have lowered the price much more than they have done.

[the knife] 13/11/2003 10:16

all disgruntled shareholders,

note the management email addresses on the first post if you want to speak out. suggest you send them this thread, should get as many people as possible tuned in

i am currently trying to get information on major shareholders, but information is largely out of date, with major changes after the buyback.

regards

the knife

[the knife] 13/11/2003 10:05

mad4IT

thanks, much of my focus is on this one at the moment

i love companies, and I am saddened when i see them suffering because of weak management. ARC is a company with a lot of potential, but it is bleeding cash like quentin tarantino villians

clearly the salaries are far too high, i do not know for certain what they should be. but there is no way ARCs staff costs per employee should exceed ARMs. perhaps the sensible first step in rectifying this problem is for an immmediate pay cut across the board to bring staff costs into line with ARMs. that would save some £5-5.5m a year and should not be difficult to sell to employees. anyone who leaves because as a result does not deserve to be working at ARC. but management should tell them that if revenue targets are missed there can only be more pay cuts to bring them into line with sector. at the end of the day there have to be revenues and profits to justify pay, and ARC has consistently missed revenue targets. i suggest targets should be not less than £14m in 2004 and £20m in 2005

regards

the knife

[mad4it] 12/11/2003 10:51

the knife

Excellent analysis.

I've not seen you around on the BB before, are you a trader or does your interest lye solely with ARK ?

[the knife] 12/11/2003 10:13

playmaker, i have no doubt they have highly skilled staff, but the stats i have produced above strongly indicate they are significantly overpaid nevertheless

re turnover forecasts, if they reach £30m in 3-4 years, on say 180 staff, that would be £167k per head. but at present £30m looks like a dream. and £167k is only twice 2002 staff costs per head of £84k while ARM 2004 revenue forecasts per employee are curently (201.1/56.6=) 3.6x 2002 staff costs per employee and the sector is (125.5/39.3=) 3.2x.

fact is ARC management need to convince the market there is light at the end of the tunnel. at the moment there is none. surely the excessive staff costs have a lot to do with that

they have to give investors an achievable target for profitability. if they can do that, confidence will return. but if they do not, the shares may continue to drift down, and at penny stock levels they risk losing business if customers lose their trust.

the management must give the staff the hard word, present them with the facts. its pay cut or destruction

regards

the knife

[playmaker] 11/11/2003 11:43

knife - no I dont work for ARC, just going on a hunch that the buying should be done when everyone is worried - I would be happier if the price dropped a little further, say to 15p. I dont know much about the fundamentals etc, but the fact they have high salaries may suggest that they have the top people in the sector, on the other hand they may just overpay themselves...!!

[the knife] 10/11/2003 10:27

playmaker, you work for ARC? if so, its good to hear someone from the inside confirming they see value in the shares!

[the knife] 10/11/2003 10:19

dont forget we are talking about the average staff costs, some people get a lot more and some a lot less

i dont think there is much point in me, as a minor shareholder, asking the management why. i assume its because management have not felt pressured since they have had substantial funds in the bank and because they would immediately make 200 enemies of people they work with if they demanded an across the board pay cut. i think what needs to be done is the major shareholders need to put on pressure for a review of salaries in light of situation

fact is the desrepancy is shareholder value and assuming it is £8m it could be worth 8/0.2 = £40m or 8/0.15 = £53m depending on what discount rate you use

dont forget ARC own shares in itself, net 138m shares. so cash per share on that basis was 40.5/138= 29.3p at sep 30th.

and the US economy is now growing at about 7% and leading a broader global economic recovery. chip-related sector is showing substantial improvements

if management try to take this business private, creating the view they are relieving shareholders of their misery, it will be a disgrace

what needs to be done is the cost base made competitive so this business can thrive as a listed company!

[kiwihope] 07/11/2003 12:13

I don't think an average gross salary of £70K+ (excl. employers NI) is peanuts!

The point here is that whilst arc are cash flow negative they should take reasonable steps to limit cash spend. Of course we want them to retain the best staff, but there are limits. And the company bottom line performance would be better if costs were lower.

Knife, have you asked the company to explain why their average employee costs are so high?

[playmaker] 07/11/2003 11:36

you know what they say - if you pay peanuts you get monkeys. This has slipped a lot a looks interesting at these levels

[the knife] 07/11/2003 10:00

kiwihope, i think its a legacy of the tech boom, these guys being mainly hired i guess in late 1999 or early 2000 at peak of the market salaries. fact is the market rate is now about half those levels.

some of the example companies in my post above have fewer employees than ARC so its not about size. grahamburn - nor would NI costs come into it as its the same for all companies. redundancy costs are not salaries/wages. i think their average salaries have been rising as the lower paid workers have been laid off.

if there was a blanket pay cut i dont think everybody would necessarily leave - where wold they go to? who would take them on at what salary? and presumably they would forfeit their share options. if someone has 1m opts which might be worth 5-10p each in option valuation thats worth 50-100k

i think this company could virtually reduce cash burn to zero if it could increase revenues by about £4m and reduce costs by say £10m. they might try to take the business private and offer the staff equity in return for slashing their salaries. but i think this would be very bad for their reputations

the fact is that the excess salaries capitalised belongs to the shareholders. if the excess salaries is say £8m discounted at say 20% its worth £40m to the shareholders. so if they do try to take this business private i believe its in the major shareholders interests to block it. they should surely be putting pressure on the management to pass this value onto the shareholders

[grahamburn] 06/11/2003 18:05

I have not studied the annual reports but could the high employee costs including NI costs be partially attributable to redundancy payments? If so it would be invalid to divide the figure by the remaining staff number. Might look if time permits sometime! But at the end of the day, it's what the staff achieve for the bottom line and shareholder value that matters to me.