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UPDATE 1-Smartphone slowdown hits ARM's royalties in fourth quarter

LONDON, Feb 4 (Reuters) - British chip designer ARM Holdings missed fourth-quarter expectations for royalty revenue from the use of its processors in smartphones because of slower growth in sales by Apple and Samsung.

The Cambridge-based company, whose technology is in nearly every smartphone, including the iPhone 5 and Galaxy S4, reported processor royalties of $130.4 million, up 7 percent, but short of analyst forecasts of $137.9 million.

Fears that the top-end smartphone market may have reached saturation were reinforced last month when Apple and Samsung, both ARM customers, reported lower than expected sales of the iPhone 5S and Galaxy S4 phones in the holiday season.

ARM said its royalties continued to grow faster than the broader semiconductor market, but the degree of outperformance was impacted by slower sales of chips for high-end smartphones in the second half of the year.

"Despite slower growth in one end-market we expect full year 2014 processor royalty revenues to grow at a similar rate to that reported over the last three years," the company said.

Shares in ARM fell to a five-month low after the results, and were down 5.1 percent at 883.5 pence at 0819 GMT.

ARM said it continued to see strong demand for the licensing of its technology for networking, servers and wearable devices, as well as smartphones and tablets.

Processing licensing revenue rose 26 percent to $107.2 million in the fourth quarter, the company said, beating market consensus expectations of $94.7 million.

Overall, ARM posted a 19 percent rise in pretax profit to 95.5 million pounds ($156 million) on revenue up 15 percent at 189.1 million pounds, broadly in line with expectations.

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