Soaring iPhone sales signal 57% surge for ARM Holdings

The Cambridge-based company, whose designs are found in more than 90 per cent of mobile phones, reported pre-tax profits of 37.6 million on sales of 92.3m, up 16 per cent, for the first quarter.

Royalty revenue, which is reported a quarter in arrears, rose 33 per cent as it shipped a record 1.4 billion chips, beating a 20 per cent rise across the semiconductor industry.

Sales of smartphones are surging and Carphone Warehouse reported on Monday they would account for about two-thirds of mobile phones sold by 2010-11.

Demand for the devices, many of which contain three or four ARM designs, will help the company meet expectations for revenue for the year.

Finance director Tim Score said growing demand for smartphones "underpins our confidence".

He said: "ARM is well exposed to a multi-year trend of increasing smartphone penetration."

Shares closed down 6.8p at 251.8p.

The company said that sales of chips used in other devices such as digital TVs and disk drives had also shown strong growth.

The firm added: "ARM has made an encouraging start to 2010 in improving trading conditions, although there remains a lack of certainty as to the impact of the broader macro- economic environment on end-consumer demand later in the year."

The stock has risen in the slipstream of market-beating results from Apple, which also uses its designs in the new iPad mobile computer, and takeover speculation, although that has been dampened by the company.

ARM trades on a price-to-earnings ratio of 31 times for 2011 forecasts, twice the average for European semiconductor companies, according to data from Reuters.

Analysts at UBS said the results were "solid" although retained a neutral on the shares.