Sales and profits rose sharply in the fourth quarter at ARM Holdings, boosted by strong Christmas sales of mobile phones and Apple's iPod music players, which contain chips designed by the company.

The UK-based semiconductor designer saw sales rise 22 per cent to £41.5m ($78.1m) in the quarter to the end of December, while pre-tax profits more than doubled to £5.3m compared with the same quarter the previous year. For the full year, sales were up 19 per cent at £152.9m, and pre-tax profit rose 82 per cent to £42.2m. This month, Apple reported a sixfold surge in sales of iPods during the Christmas period and a quadrupling of fourth-quarter profit.

At the same time, a number of mobile manufacturers, which also use ARM-designed chips in their handsets, have reported sharp rises in fourth-quarter sales. Texas Instruments, the world's largest maker of mobile phone processors, said on Tuesday that demand for phones during the Christmas period had lifted revenues to a nine-year high.

More than two-thirds of ARM's shipments were to the wireless industry.

Warren East, chief executive, said he was expecting sales to increase by at least a further 20 per cent this year, despite predictions that conditions were likely to get tougher for the semiconductor industry overall.

He said: “It will be a fairly flat year for the industry but ARM is designed into growth areas such as mobile phones.” Confidence has been underpinned by an increase in the company's order backlog, which at the end of December was up 30 per cent from the previous year. But analysts were disappointed by performance at Artisan, the US rival it bought for £913m just before Christmas. Artisan's fourth-quarter revenues, came to just $15m, compared with $25m in the previous three months. ARM said, however, that the Artisan business was expected to expand by 20 per cent this year.

Earnings per share rose from 1.5p to 3.1p, and a full-year dividend of 0.7p is recommended, representing a 17 per cent rise from last year's 0.6p. The shares fell 6¾p to 98p.

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