Chip Designer ARM's 1Q Net Profit Rises 36% --Update

By Razak Musa Baba and Rory Gallivan 

Chip designer ARM Holdings PLC on Tuesday reported a 36% rise in first-quarter net profit amid strong demand for its technology in smartphones and tablets and said it expects 2015 revenue in dollar terms to meet expectations.

ARM, whose technology can be found in the vast majority of the world's smartphones including those made by Apple Inc., recorded net profit of GBP85 million ($126.7 million) for the three months to March 31, compared with GBP62.3 million a year earlier. Revenue rose 22% to GBP227.5 million, beating analysts' projection of GBP224.1 million.

Shares in ARM, which makes money by licensing its designs to chip makers, then collecting royalty revenue when the chips ship, were up by more than 5% at 0725 GMT.

Processor-royalty revenue in dollar terms, a much-watched figure, rose 31% on the year, the company said, adding that it has signed 30 processor licenses for a broad range of applications.

"As the world becomes more digital and more connected, we continue to see an increase in the demand for ARM's smart and energy-efficient technology, which is driving both our licensing and royalty revenues," said Simon Segars, chief executive.

Processor-licensing revenue was down 2% in the quarter, which was in line with expectations following strong growth previously, said Chief Financial Officer Tim Score during a call with journalists, adding that he expects it to grow in future quarters.

ARM didn't give a figure for full-year revenue expectations, but analysts at Citi are predicting revenue of GBP979.6 million. Consensus estimates on ARM are likely to edge up following the encouraging royalty performance reported Tuesday, the analysts said.

Aside from smartphones and tablets, ARM said it is also seeing demand for its processors to be used for servers and networking and for the "Internet of Things", a term used for the growing tendency for more items to be wirelessly connected.

ARM expects to benefit from the growth of the Internet of Things in areas such as health and in cars, said Mr. Score.

Write to Rory Gallivan at [e-mail]

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