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Arm Holdings boosted by chip demand

City A.M. Reporter
A surge in demand for smartphones helped chip designer ARM Holdings win market share and beat analysts’ expectations in the fourth quarter, but the economic downturn still trimmed pre-tax profit by four per cent.

“(Chipmakers) are designing more ARM technology into an increasingly broad range of end-markets applications, with mobile computing, smartphones and microcontrollers being prominent,” finance director Tim Score said yesterday.

Smartphone sales grew 30 per cent year-on-year in the fourth quarter to 53m phones, according to research firm Strategy Analytics, and new vendors are entering the market.
Cambridge-based ARM, whose designs are in more than 90 per cent of the world's mobile phones, reported pretax profit of £32.3m for the three months to end-December. Earnings per share fell eight per cent to 1.79p

“Demand for ARM’s processor and physical IP technology from industry leaders remains strong,” added Score.
A record 1.3bn chips based on the firm’s designs were shipped in the quarter.
Analysts expected pretax profit of £28.4m and EPS of 1.6p, according to a consensus of 29 analysts. Revenue of £85.5m for the quarter was 10 per cent lower than a year earlier, but beat the £81.5m analysts forecast.

The firm, whose designs are licensed to chipmakers such as Infineon and STMicroelectronics, gained market share in 2009, with a 10 per cent fall in revenue broadly half that of the semiconductor sector.
ARM said the market was widely expected to pick up in 2010, but speed of recovery was still unclear and would depend on consumer confidence.

Shares in ARM, which hit a near eight-year high of 205p last week on speculation that its designs were in Apple’s iPad tablet, gained 5.5 per cent yesterday to 200.3p.

Analyst Gareth Jenkins at UBS, who rates the shares a “buy”, said a 7.4 per cent rise in royalty revenue beat expectations, due to an increased mix towards smartphones coming quicker than expected. “We believe these are solid results with upside from both royalties and licensing business,” he said.