UK chip designer ARM hits a high after iPhone 6 boost

Reuters News
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Posted: Apr 21, 2015 5:14 AM

By Paul Sandle

LONDON (Reuters) - ARM Holdings, the British chip designer favored by Apple, beat expectations for first-quarter profit thanks to demand for the iPhone 6, and said its royalties would grow as its latest technology is used in more smartphones.

Shares in the Cambridge-based company rose to an all-time high of 1,233 pence after it posted a 24 percent rise in first-quarter pretax profit to 120.5 million pounds ($179.1 million).

That beat analysts' expectations of 115 million pounds, according to a company-provided consensus.

The shares were up 4.6 percent at 1,204 pence at 0717 GMT (0317 a.m. EDT)

"In the second half of 2015 we expect to benefit from the increasing deployment of ARMv8-A technology, our latest generation of processors, in the newest smartphones and tablets," Chief Financial Officer Tim Score said on Tuesday.

"These chips typically have a slightly higher royalty rate than the previous generation."

Royalty revenue, collected a quarter in arrears from a record 3.8 billion chips shipped, rose 26 percent on an underlying basis, ARM said.

Analysts at Citi said they expected full-year consensus expectations for ARM's revenue would edge up to reflect the encouraging performance in royalties.

ARM's processor licensing revenue dipped 2 percent, missing market forecasts, but Score said he expected licensing revenue to rise 5-10 percent in the longer term.

Industry-wide revenues had slipped after a busy fourth quarter, in line with normal seasonal trends, which would be reflected in its second quarter, Score said. But overall second-quarter revenue would be in line with market expectations, which stand at $354.6 million.

(Editing by Kate Holton and Pravin Char)