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  1. Technology
September 13, 1995


By CBR Staff Writer

Acorn Computer Group Plc had warned in June that its first half results would be hit by tough market conditions (CI No 2,687), but the reality was worse than a mere increase in losses. The Cambridge-based company has restructured – forming two new divisions and making 56 people redundant – as well as closing down its loss-making German division. Acorn Education will handle the company’s core market place, continuing to sell RISC machines, while also reducing the dependency on hardware by selling a wider range of value-added products to schools for industry-standard and proprietary systems. It will also introduce direct tele-sales to schools and appoint a network of agents. The technical staff has been set up as Applied RISC Technologies to design and develop applications in areas other than desktop computers, according to new group managing director David Lee. He cited mobile tele phony, games machines and handheld computers as areas which could use such technology centered around the Advanced RISC Machines Ltd processors. It will continue to support exsiting RISC technologies. The limited holding company, Acorn Computers Ltd has no operational function and Lee indicated that its status is under review. The group turned in pre-tax losses of ú7.6m, up from ú2.0m losses last time. There was a a ú1.2m hit for a stock writedown, redundancy charges of ú612,000, and a ú360,000 warranty provision. Acorn Computers Ltd’s sales fell 21% to ú18.8m and Online Media turned over ú169,000 in the half. Sales in Germany in the half were just ú424,000 and losses were ú238,000. Lee said the 56 redundancies were necessary to secure the remaining 150 or so jobs and would save the company around ú1.4m annually. The closure of Acorn Computers GmbH resulted in a ú500,000 charge in the first half and Lee said he did not anticipate any further hits this year. Of the ú17.1m net proceeds from the rights issue (CI No 2,609), Lee admitted that more than hoped had gone on companies other than Online Media Ltd, which accounted for ú2.1m of the ú8.5m overdraft that was eliminated.

Set-top box

A further ú2.4m was invested in Online in the half. The surprise came with the ú3.7m cash outflow from Acorn Computers Ltd, which was higher than expected and could possibly disconcert investors, said Lee. After all that the group was left with ú2.5m net cash at the half-way stage, together with a ú15m overdraft facility. Online Media is completing development of its second generation digital set-top box built around the ARM7500 processor and the third generation is in the design phase. Phase one of the Cambridge interactive trial was completed in February when phase two was started. National Westminster Bank Plc and Tesco Plc were among the first to sign up for the trial. Online Media won a contract to supply set-top boxes Lightspan Partnership Inc, which plans to distribute them in the US as a part of its educational multimedia programme (CI No 2,687). Chairman Elserino Piol warned in his statement that the major telecommunications providers in Europe and the US were moving more slowly the predicted towards large-scale commercial trials and that Online Media must find partners that recognise the benefit of the technology in a commercial environment. The 42.8% interest in Advanced RISC Machines Ltd was the one real success for Acorn in the half. Sales rose 47% to ú4.2m in the first half and staff numbers doubled in the year to the end of June. Advanced has licensed its ARM7TDM1 (Thumb) architecture, launched during the half, to NEC Corp. It also unveiled the ARM Tools 2.0 tool kit. Piol admitted that the core business faces a challenging future but he had high hopes for Online Media and Advanced RISC Machines. Lee said the restructuring had nothing whatsoever to do with the current upheavals at Ing C Olivetti & Co SpA, which has 59% of Acorn, and he did not anticipate any fallout from the restructuring in Italy. Acorn will pay no dividend. Acorn shares dipped a penny to 104p.

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