Chip producer ARM boosted by results

SHARES in British chip manufacturer ARM Holdings, the firm behind Apple’s iPad, rose following a 72 per cent increase in full-year profits, despite warnings of a dot com bubble from analysts.

Profits for the FTSE 100 chipmaker rose to £167.4m before tax in the year to 31 December, up from £96.8m the year before.

Revenues increased to £406.6m in the year to December for the Cambridge-based firm.

ARM’s chips, which feature in the iPhone and iPad, consume less power than traditional PC microprocessors, vital for battery-powered devices.

Shares rose 6.10 per cent to 547.5p yesterday, raising concern amongst analysts as to whether the stock is over-priced.

Analyst James Cranshaw said: “It’s one of these shares that traders and momentum investors see as going up so they buy it as it’s going up.

“We think that there’s a bubble in the share price. It doesn’t reflect reality and it could take a long time before the market wakes up to this.”

He added: “It seems to be that the prices of chips just keep on going down and down. If you want to expect good revenue growth for ARM, it’s not quite good enough to justify the valuation that it’s trading at.”

However, Standard and Poor’s upgraded its rating from “strong sell” to “sell” following the better than expected fourth quarter results.

Earlier this month, ARM tied up a deal to provide chips for Microsoft’s next version of its Windows operating system.

The Windows software will be designed for battery-powered products such as tablets and smartphones, for which ARM will start receiving royalties in about two years.

Chief executive Warren East said: “ARM continues to sign licenses with influential market leaders in an increasingly digital world, and as the industry chooses ARM technology in a broadening range of electronic products, it further drives our long-term royalty opportunities.”