Arm first quarter profits buoyed by strong iPhone sales

Sales and profits at Arm Holdings showed strong growth at start of 2015, as the company was buoyed by strong sales of Apple iPhones and consumers shifted to 4G mobile devices.

The company, one of the UK's only large global technology groups, reported on Tuesday revenues of $348.2m in the first three months of this year, up 14 per cent compared to the same period a year before, building on earlier robust quarters.

Pre-tax profits were $120.5m in the first quarter, a 24 per cent increase year-on-year. Both sales and profits came in ahead of analyst estimates.

Arm sells licences for its blueprints to manufacturers that also pay royalties for each unit shipped. Its components are used in more than 95 per cent of smartphones.

Royalties from processor designs, an area of the business that analysts focus on, rose 31 per cent year-on-year to $168m.

However, within a largely positive set of results, Arm said the revenues from licensing - a part of its business which makes up 38 per cent of its overall sales - had grown to $133.2m, up just 3 per cent.

Arm blamed an "order backlog," saying that though it expects to see the return of stronger growth in licensing. "We expect quarterly sequential movements of backlog to be lumpy," it said.

"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 in a statement.

Last year, Arm refreshed its range of chips for smartphones. The company is banking on continued strong growth as manufacturers began to release products on its latest technology, predicting that half of all new smartphones sold this year will contain its latest chips.

In recent months, Arm has been boosted by record sales of Apple's iPhone 6 and iPhone 6 Plus - devices that contain the company's technology.

The Cambridge-based group has also benefited from consumers upgrading from 3G mobiles to 4G devices. These contain Arm-designed components that allow the group to make more money per device.

Analysts have expressed concerns over whether the company will continue to increase revenues from royalties in the long term, as it continues to be affected by the slowdown in the overall high-end smartphone market.

The company says it has diversified well, becoming a key supplier to most major electronics manufacturers, while also pursuing other areas for future growth, such as providing components for the so-called internet of things.

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