Market Report: Arm Holdings dives on fears about outlook for smartphones

Fourth-quarter revenues grew 19% to £269.1m, but the firm warned that “increased economic uncertainty” might restrict consumer spending and hit revenues

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Arm Holdings caught the smartphone bug as the iPhone chip designer dived on fears about the outlook for smartphones. The FTSE 100 company revealed it made a £135.8m profit in the fourth quarter – which was below analysts’ expectations – after stripping out a $9m (£6.2m) “royalty catch-up” when a customer said it had underpaid Arm for previous years.

Fourth-quarter revenues grew 19 per cent to £269.1m, but the firm warned that “increased economic uncertainty” might restrict consumer spending and hit revenues, causing it to reverse 41p to 899p at the bottom of the blue-chip index.

Eoin Lambe, an analyst at Liberum, said investors tend to focus on royalty revenues for its processors, which at $196.6m were below his $199m forecast; Julian Yates at Investec said there was “no magic number” in Arm’s results that would propel the shares back up to 1,200p, their peak from last year.

Elsewhere, a rebound for banks, including a 7.4p rise for Royal Bank of Scotland to 233p, boosted the FTSE 100, which was 40.11 points higher at 5,672.30, as investors were more relaxed about the health of the big lenders’ balance sheets.

However, a mixed message from the Federal Reserve’s chair Janet Yellen – telling Congress the US central bank plans to keep raising rates gradually but warned that the global downturn could knock America’s economic recovery off course – kept investors on edge.

Tesco, 7.5p better off at 181.3p, continued to rise as investors latched on to its turnaround, while Anglo American attracted the attention of Goldman Sachs which now has a 3.4 per cent stake in the embattled miner, down 6.8p at 327p.

Hikma Pharmaceuticals recovered from an early thrashing to finish just 50p down at 1,945p. Earlier, the drug-maker lowered its revenue forecasts for Roxane Laboratories and cutting its cash payment by $535m, having agreed a $2.65bn takeover of the US firm in July.

Among the small-caps, big data firm WANdisco, a former AIM tech darling, plunged 41p to 150p after warning that revenues for 2015 would be lower than analysts were expecting.