Trading Update

Arc International PLC
5 October 2001



                  UPDATE ON STRATEGIC AND OPERATIONAL PLANS

      THIRD QUARTER TRADING RESULTS IN LINE WITH 13 SEPTEMBER STATEMENT


Elstree,UK - 5 October 2001: ARC International plc (LSE:ARK.L), a leading
designer and developer of customisable, high-performance microprocessors and
related intellectual property solutions, today provided confirmation of its
third quarter 2001 trading performance. It also provided an update on its
strategic and operational plans following the recent appointment of John
Stockton as Chief Executive officer.



Key Points

  * Third quarter turnover approximately £2 million, in line with 13
    September statement
  * 12 design licences and 2 additional customers won in third quarter;
    including a new tier one OEM customer and substantial re-licensing by
    established customers
  * Approximately £125 million cash in hand at the end of September 2001
  * Strategy being refined to exploit ARC's major competitive advantages
  * Increased sales emphasis to be placed on high volume standard product
    opportunities with major semiconductor suppliers
  * Product lines consolidated into two groups: Hardware IP and Software
  * Sales and marketing retargeted and strengthened
  * Clear focus on target vertical markets




John Stockton, Chief Executive Officer of ARC International, said:

'Market conditions remained difficult throughout the period but I am
encouraged by the addition of another tier one licensee and the repeat usage
of our technology by a number of our established customers.

'In today's tougher market conditions we will focus more sharply on the sales
channels and market segments where we have the greatest competitive advantage
and where we can build solid ongoing trading relationships. We will place
increased sales emphasis on standard product opportunities with major
semiconductor suppliers where potential volumes are substantially higher. The
consolidation of our product lines into two groups, Hardware Intellectual
Property and Software, will enable us to provide our customers with more
integrated solutions and provide a clear market and service focus in each
area.

'I have great confidence in the Company's future success based upon our
strategy and operational action plans for advancing our progress towards
profitability.'



Trading Update

Preliminary, unaudited turnover for the three months ended 30 September 2001
is expected to be approximately £2 million, compared with £3.5 million in the
three months ended 30 June 2001.

During the third quarter, we added 12 new licence agreements and two new
customers, including a tier one original equipment manufacturer (OEM),
bringing our total design licences to 99 licences from 58 customers. Our
technology was re-licensed by several of our established customers for new
designs, reflecting the growing recognition of its commercial benefits. In
addition we concluded a number of significant development and partnership
licences with leading companies within their market sectors.

The pre-exceptional net loss for the third quarter is expected to be
approximately £7 million, compared with a pre-exceptional net loss of £6.1
million for the second quarter of 2001. Cash in hand at the end of the third
quarter was approximately £125 million.

Actual results for the quarter ended 30 September 2001 will be reported on 1
November 2001.



Strategic and Operational Plan

The Board has recently undertaken an extensive strategic review. This
confirmed that the commercial advantages of ARC's innovative technology are
being increasingly acknowledged. However, in the light of today's market
conditions, the strategy is being refined to exploit ARC's competitive
advantages to the full.

The key changes being implemented are:

  * Sales channel focus is being adjusted. Increased sales emphasis will be
    placed on application specific standard product (ASSP) opportunities
    through major semiconductor companies, which offer higher potential
    volumes and ongoing revenue through multiple designs and royalties. Within
    the system OEM channel, ARC's principal sales channel to date, there will
    be more targeted concentration on developing business with tier one
    customers. High-quality partnership licences will be sought with other
    intellectual property companies that are market leaders within their
    sectors.
  * Product lines have been consolidated into two groups: Hardware
    Intellectual Property (IP), comprising the microprocessor and peripherals,
    and Software, comprising development tools and protocols. Single
    engineering and product development teams will operate within these two
    groups, completing the integration of the acquired Metaware, Vautomation
    and Precise businesses. While the major activity of the Company will
    remain its Hardware IP business, development of the software business will
    be improved through a more integrated offering.
  * Product development has been prioritised to target revenue enhancing
    projects aimed at our selected vertical market segments.
  * Sales and marketing is being retargeted and strengthened. An integrated
    sales team, incorporating the hardware and software teams, will enable us
    to achieve more effective cross-selling and lead generation. Activity will
    be focused on our target customers and selected vertical market segments.
    Salesforce quotas and incentives are being revised to support the
    strategic objectives.
  * Vertical markets will be targeted with increased clarity to exploit
    ARC's competitive advantages in each market segment:
      + Wireless: ARC's extendable architecture is particularly suitable for
        battery powered applications.
      + Wired networking: ARC's multi-processor capabilities, configurable
        and extendable architecture and peripherals strength are major
        benefits.
      + Consumer electronics: ARC's configurable features enable it to
        achieve the optimum die size, provide the best battery life solution
        and be customised for the many highly specific applications in this
        sector.

In addition, the cost base of the business has been significantly reduced by
the cost reduction programme announced on 1 August. This lower cost base,
combined with the strategic and operational changes being implemented
throughout the business, are expected to advance the Company's progress to
profitability.



For further information, please contact:



John Stockton

CEO, ARC International plc

020 8236 2800



Simon Poulton

CFO, ARC International plc

020 8236 2800



Peter Aubusson

Investor Relations Manager, ARC International plc

020 8236 2800



Freida Davidson

Citigate Dewe Rogerson

020 7638 9571



ARC's management will be available on 020 7638 9571 on 5 October.



About ARC International

ARC International plc, is a leading developer of user-customisable,
high-performance microprocessor cores, including ARCtangentTM, and related
intellectual property technology enabling designers to reduce time to market
for their system-on-a-chip products. 58 licensees use ARC's technology
including: Austria Mikro Systeme, BrightCom, Conexant Systems, Cypress
Semiconductor, Fujitsu Microelectronics, IBM, Infineon Technologies, Qlogic,
RF Micro Devices, SanDisk, Texas Instruments and Vtech Communications. ARC's
target markets are wireless telecoms, wired networking, and consumer
electronics embedded systems. Products available based on ARC's technology
include digital still cameras, set-top boxes and network processors.

With headquarters in Elstree, England, ARC International plc and its group
companies employ about 230 people in research and development, sales, and
marketing offices across North America and Europe. MetaWare Inc., Precise
Software Technologies Inc. and VAutomation Inc. are wholly owned subsidiaries
of ARC International, providing software development tools, hardware and
software intellectual property and real time operating systems for an
integrated approach to system-on-a-chip development.

ARC International plc is listed on the London Stock Exchange (LSE:ARK). The
company's website is located at www.arccores.com

Statements made in this press release that are not historical facts include
forward-looking statements that involve risks and uncertainties. Important
factors that could cause actual results to differ from those indicated by such
forward-looking statements include, among others, market acceptance of the ARC
technology; fluctuations in and unpredictability of the Company's quarterly
results; general economic and business conditions; regulatory policies adopted
by governmental authorities; assumptions regarding the Company's future
business strategy; changes in technology; competition; ability to attract and
retain qualified personnel; risks associated with the Company's international
operations; and other uncertainties that are discussed in the 'Investment
Considerations' section of the Company's listing particulars dated 28
September 2000 filed with the United Kingdom Listing Authority and the
Registrar of Companies in England and Wales.



ARC International (UK) Ltd. and ARC Cores Inc., both of which are wholly owned
  subsidiaries of ARC International plc, trade under the name of ARC Cores.

         ARC Cores is a trademark of ARC International (UK) Limited.

    All other brands or product names are the property of their respective
                                   holders.