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ASML delivered an upbeat outlook for 2006 as it reported increased first-quarter sales and profits, and said it would undertake a share buyback of up to €400m.

The Netherlands-based semiconductor chip manufacturer said first-quarter bookings had exceeded expectations, a repeat of the situation in the last quarter of 2005.

“ASML will be delivering significant sales growth in Q2 2006 and is preparing to support a positive outlook for the whole year,” said Eric Meurice, chief executive. In 2005, the company’s market shrank by 9 per cent yet it managed a sales rise of 3 per cent and an improvement in profits of almost one third. The positive outlook for the second quarter was in contrast to the same time last year when Mr Meurice forecast a fall in sales.

The first-quarter’s saw sales rise 15 per cent over the previous quarter to €629m, but 8 per cent less than a year earlier. Current and expected sales growth is attributed in part to the company’s immersion system of manufacturing at the 45 nanometer scale, which it says is the only system capable of mass producing such chips.

ASML reported first-quarter net profits of €80m, 54 per cent higher than the previous quarter but under the €100m of a year earlier. Selling prices for new and reconditioned systems rose.

The company’s share price rose just over 2 per cent at the open at €17.15.

Meanwhile, ARM Holdings, the UK-based designer of semiconductors, reported a 31 per cent rise in pre-tax profits to £24.7m on sales up 17 per cent at £64.6m in the first quarter. ARM said its position in the market was improved by its first licence agreement for 45 nanometer technology.

The sales pipeline was healthy and royalties were building up, leading the company to confirm expectations of a strong 2006, it said on Wednesday. In the period it bought back £7m of shares. The buyback programme will continue, it said.

ARM shares were up almost 2 per cent in early London trading, at 139.9p.

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