UPDATE 2-ARM Q1 beats view; confident on smartphone demand

* Q1 revenue 92.3 mln stg (company poll 88.9 mln stg)

* Q1 pretax 37.6 mln stg, up 57 pct (poll 33.1 mln stg)

* Says makes encouraging start to year; on track

* Shares, which hit 8-yr high on Monday, down 0.7 pct

(Adds CEO comments; analyst reaction, shares)

By Paul Sandle

LONDON, April 27 (Reuters) - Chip designer ARM Holdings (ARM.L) posted a better-than-expected 57 percent rise in first-quarter profit, helped by booming sales of Apple's iPhone in the smartphone category dominated by the firm's technology.

The British company, whose designs are found in more than 90 percent of mobile phones, reported pretax profit of 37.6 million pounds ($58.1 million) on revenue of 92.3 million pounds, up 16 percent, for the first quarter.

Royalty revenue, which is reported a quarter in arrears, rose 33 percent as it shipped a record 1.4 billion chips, beating a 20 percent rise across the semiconductor industry.

Sales of smartphones -- handsets that perform many of the functions of computers -- are surging, and UK retailer Carphone Warehouse said on Monday smartphones would account for around two thirds of models sold by 2010-11. [ID:nLDE63M1AM]

Demand for the devices, many of which contain three or four ARM designs, will help ARM meet expectations for revenue in dollars for the year, the company said. Analysts expect revenue of $576 million, up 17.5 percent on 2009.

"It certainly underpins our confidence," Finance Director Tim Score said in a call with reporters on Tuesday. "ARM is well exposed to a multi-year trend of increasing smartphone penetration."

SHARES OFF HIGHS

Shares in the Cambridge-based company, which touched an eight-year high on Monday of 263.7 pence, were 0.7 percent lower at 256.7 pence by 0900 GMT, broadly in line with a 0.5 percent weaker index of leading companies .FTSE.

The stock has risen in the slipstream of market-beating results from Apple (AAPL.O), which also uses its designs in the new iPad mobile computer, and takeover speculation, although that has been dampened by the company. [ID:nSGE63K0BC] [ID:nLDE63M1B3]

ARM trades on a price-to-earnings ratio of 31 times for 2011 forecasts, twice the average for European semiconductor companies, according to Reuters data.

UBS said the results were "solid". "Strong underlying performance versus consensus is likely to help ARM, though based on the valuation we remain neutral," said analyst Gareth Jenkins.

Analysts expected ARM, which licenses its technology to Samsung (005930.KS), Toshiba (6104.T) and Nvidia (NVDA.O), to report revenue of 88.9 million pounds, pretax profit of 33.1 million pounds and earnings per share of 1.83 pence, according to a consensus of 23 forecasts. ($1=.6469 Pound) (Editing by Rhys Jones and Simon Jessop)