UK chip designer ARM hits a high after iPhone 6 boost

By Paul Sandle

LONDON (Reuters) - ARM Holdings (ARM.L), the British chip designer favoured by Apple (AAPL.O), beat expectations for first-quarter profit thanks to demand for the iPhone 6, and said its royalties would grow as its latest technology is used in more smartphones.

Shares in the Cambridge-based company rose to an all-time high of 1,233 pence after it posted a 24 percent rise in first-quarter pretax profit to 120.5 million pounds ($179.1 million).

That beat analysts' expectations of 115 million pounds, according to a company-provided consensus.

The shares were up 4.6 percent at 1,204 pence at 0717 GMT.

"In the second half of 2015 we expect to benefit from the increasing deployment of ARMv8-A technology, our latest generation of processors, in the newest smartphones and tablets," Chief Financial Officer Tim Score said on Tuesday.

"These chips typically have a slightly higher royalty rate than the previous generation."

Royalty revenue, collected a quarter in arrears from a record 3.8 billion chips shipped, rose 26 percent on an underlying basis, ARM said.

Analysts at Citi said they expected full-year consensus expectations for ARM's revenue would edge up to reflect the encouraging performance in royalties.

ARM's processor licensing revenue dipped 2 percent, missing market forecasts, but Score said he expected licensing revenue to rise 5-10 percent in the longer term.

Industry-wide revenues had slipped after a busy fourth quarter, in line with normal seasonal trends, which would be reflected in its second quarter, Score said. But overall second-quarter revenue would be in line with market expectations, which stand at $354.6 million.

($1 = 0.6728 pounds)

(Editing by Kate Holton and Pravin Char)