* Q2 dollar revenue down 18 pct, broadly flat in sterling
* Q2 pretax, EPS beats analysts' forecasts
* Industry outlook brightening, reiterates revenue forecast
* Shares fall 4.2 percent as unchanged outlook disappoints
* Chipmaker Wolfson gives cautious outlook, shares fall
(Adds Wolfson Chief Executive comments, share price)
By Paul Sandle
LONDON, July 28 (Reuters) - British chip designer ARM Holdings posted an 18-percent fall in second-quarter dollar revenue on Tuesday, beating the downturn in the sector, but the lack of an upgrade to its sales forecast hit its shares.
ARM, whose royalty revenue lags the sector by a quarter, said demand had bounced back from a low at the end of 2008. A positive view of the third quarter from chipmakers, ARM's customers, also meant it was confident in its full-year outlook.
"With industry activity improving in recent months and ARM's market share gains in target segments looking set to continue, ... we expect full-year dollar revenue to be at least in line with current market expectations (of $470 million)," Finance Director Tim Score said in a call with reporters.
But he said it was too early to say whether demand from end-consumers would recover at the end of the year, during the holiday season when sales of consumer goods swell.
"The question that remains outstanding is what is the trajectory of consumer end-demand, and it's too early to call beyond the third quarter where that goes," he said.
British chipmaker Wolfson Microelectronics, whose chips are in Apple, Samsung and LG smartphones, said end-demand was weak.
"End-consumer demand remains uncertain and we are having very short lead times and volatility in terms of customer order plans," Chief Executive Mike Hickey told Reuters.
"I am not sure we are seeing normal seasonal trends -- the end-market is roughly up 5-10 percent for Q3, and seasonally you'd expect that to be higher," he said in an interview.
"We are seeing a 6 percent at the moment (quarter-on-quarter rise in order backlog), so we are in the middle of that."
Shares in Cambridge-based ARM, which have rallied 50 percent since the start of the year, were down 4.2 percent to 126.75 pence by 1022 GMT. Wolfson was down 4.3 percent to 110.75 pence.
"ARM is off because there aren't material upgrades today," said one analyst who asked not to be named. "With the run the shares have had over the last two to three weeks people were anticipating something more in the outlook statement."
SMART PHONES
ARM, whose chip designs are in Apple's iPhone and Nokia's N-Series, posted second-quarter revenue of $105.5 million, or 64.8 million pounds, just short of expectations.
Pretax profit was 16.3 million pounds, down 24 percent year-on-year but beating estimates, while earnings per share were 0.95 pence, also ahead of the market's view.
Overall industry revenues declined 30 percent in the first half, ARM said, while its dollar revenues declined 14 percent.
The market was expecting revenue of 66.7 million pounds, pretax profit of 13.9 million pounds and earnings per share of 0.78 pence, according to a poll of 15 analysts.
ARM makes revenue from licensing its designs to chipmakers such as Texas Instruments, STMicroelectronics, and Toshiba, and takes a royalty on each chip shipped.
Licensing was "robust", driven by demand for smartphones and mobile computing, Finance Director Score said, with 17 licences signed in the quarter, the same number as the in first quarter.
(Editing by Marie Maitre and Lin Noueihed)