Record demand for smartphone chips lifts ARM

ROCKETING interest in Apple products meant sales at chip designer ARM Holdings have increased by a fifth over the last year, sending shares in the Cambridge-based firm up more than 10 per cent yesterday.

The company beat market expectations to see revenue hit £145m in the third quarter of the year, up from £120m in the same period last year. ARM also said that its growth had far outstripped the rest of the market. Royalties from the 2.2bn ARM-designed chips sold in the quarter rose 27 per cent, against an industry average of four per cent.

The company – which designs the energy-efficient processors used in most smartphones and tablets as well as handheld games consoles and satnav systems – has consistently beat expectations this year and defied disappointing growth in the industry as a whole.

Chief executive Warren East predicted continued growth over the next few years as more devices and everyday household items – such as TVs, fridges and washing machines – become increasingly “smart” and require advanced microchips.

“As we move into an ever more connected world of mobile computing, cloud-based networks and the internet-of-things, ARM is seeing increased demand for its high performance and low power technology,” East said yesterday.

The company’s share price, which suffered earlier in the year as growth appeared to stagnate and major rival Intel announced an aggressive move into the smartphone chip space, has recovered over the summer and hit a year-to-date high yesterday.

“Margins were 70 basis points below our forecast and expenditure a touch higher, which slightly lessened the profit beat but should not take away from the clear positives in this statement,” Investec’s Julian Yates said.

Profit at the firm continued to impress, rising 22 per cent to £68.1m.

ARM said it was entering the final quarter of the year with a record order backlog and “a robust opportunity pipeline”, but warned that there would only be a “moderate” increase in revenue on the same period in 2011, since there had been unusually good trading in the final three months of last year.