* Q3 revenue 75.2 mln stg, up 5 pct (forecast 73.7 mln stg)
* Q3 EPS 0.53 pence, down 40 percent (forecast 0.5 pence)
* Sees year revenue at least in line with market view
* Shares up 0.54 percent
(Adds company comments, analyst reaction, shares)
By Paul Sandle
LONDON, Oct 27 (Reuters) - British microchip designer ARM met expectations for third-quarter revenue and earnings and said it was expecting to outperform a recovery in the industry next year.
"Despite pressure on customers' R&D budgets this year, demand for ARM's processors and physical IP technology remains strong, with a record numbers of licences signed in the third quarter," Finance Director Tim Score told reporters on Tuesday.
"Since the middle of the year, activity levels and the level of optimism in the industry have improved."
Score said all signs pointed to a significant pick-up next year, and ARM expected to beat the 15 percent forecast rise for the sector.
The company, whose designs are in 90 percent of mobile phones, including Apple's iPhone and Nokia's N97, said it expected full-year revenue in dollar terms at least in line with market expectations, which it put at $476 million.
Shares in the Cambridge-based firm, which are up 72 percent since the start of the year, beating the DJ Stoxx technology index by 50 percent, were up 0.54 percent at 150 pence at 1112 GMT.
"This is a solid set of numbers, but given the Q3 outperformance, it is a little disappointing that guidance is not upgraded at this point," said Panmure Gordon analyst Nick James, who has a "sell" recommendation on ARM shares.
UBS, however, said the group's strong margin performance would likely see forecasts rise.
"We believe this is prudent, and the Q3 beat plus solid gross margin performance is likely to see consensus EPS rise towards our forecast (5.18 pence versus consensus 4.89 pence)."
SHIPMENTS RECOVER
ARM, whose designs are used by chip makers Qualcomm, Texas Instruments and Samsung, said shipments, measured a quarter in arrears, had bounced back 75 percent from the second quarter as customers restocked.
Chipmakers, led by ARM rival Intel, have been increasingly optimistic about a tech sector recovery before the holiday season, though Toshiba Corp, Japan's biggest semiconductor maker, sounded a cautious note earlier on Tuesday when it said prospects for the world economy remained unclear.
ARM said it was continuing to win market share, driven by demand for smartphones, netbooks and other electronic products, and its revenue would fall about 13 percent in 2009, against a 20 percent drop in the semiconductor market.
The firm signed a record 28 processor licences in the quarter; 13 for smartphones and mobile computers, including eight for its Cortex A series of advanced processors, and 15 for products such as automotive, digital TVs and microcontrollers.
Licensing revenue, however, was down 14 percent in dollars, as it sold more term and single-use licences, which have lower upfront fees but higher royalties.
The company reported revenue of 75.2 million pounds ($123 million), up 5 percent, in the three months to end-September, and EPS of 0.53 pence, down 40 percent.
Analysts were expecting revenue of 73.7 million pounds and EPS of 0.5 pence, according to Thomson Reuters I/B/E/S. (Editing by Rhys Jones/Will Waterman) ($1=.6119 Pound)