British chip designer ARM Holdings beat first-quarter profit forecasts, driven by buoyant demand for smartphones and tablets that use its processor technology and the strength of the dollar.

Chief financial officer Tim Score predicted the success of customers such as Apple and Samsung would help the firm to continue outperforming rivals, boosting its high-flying shares over 8 per cent on yesterday.

ARM licenses its processor blueprints to chip-makers such as Qualcomm, and it receives a royalty on every chip shipped in devices ranging from Samsung’s Galaxy S4 and Apple’s iPhone 5 mobiles to dishwashers and running machines.

The Cambridge-based company reported a 44 per cent jump in first-quarter adjusted pretax profit to £89.4 million, ahead of analysts’ average forecast of £77.6 million. Revenue rose 28 per cent to £170.3 million.

The results reflect the popularity of tablets, such as Apple’s iPad, and smartphones as holiday season gifts.

ARM reports revenue a quarter in arrears, so its first-quarter numbers are based on chips shipped in the last three months of 2012.

“We benefited from the growth of smartphones, tablets, and smart TVs, as well as our customers gaining market share in embedded products, such as chips going into cars, industrial automation and consumer white goods,” Mr Score said.

Consumers are choosing tablets over traditional PCs, which are mainly powered by Intel processors. Apple alone contributes about 20 per cent of ARM’s processor royalties, analysts estimate. Royalty revenue grew 33 per cent year on year in the quarter, generated from 2.6 billion ARM-processor-based chips shipped in the quarter before. That compares with industry revenue growth of about 2 per cent.

Even low-cost smart devices can contain multiple chips based on ARM technology.
– (Reuters)