Microchip designer,ARM Holdings(LSE: ARM) has seen its shares slump today, after the company issued a relatively upbeat third quarter trading statement. Indeed, the company reported that during the third quarter royalty payments rose 9%, compared to growth of only 2% during the second quarter.
However, compared to the same period last year, ARMs growth is slowing, as the company reported double-digit royalty growth of 13% during the third quarter of last year.
This years slower growth rate comes despite the companys efforts to boost demand for its products by givingfree software to manufacturers of smart devices in an attemptto cement ARMs position in the market for the Internet of Things.
ARMs growth is slowing, which is why the companys shares have fallen today. Whats more, recent comments made by ARMs peer,Microchip Technology,about the state of the semiconductor industry have spooked already jittery investors.
Specifically, Microchip believes thatthe semiconductor market is about to enter a cyclical downturn, which would put the brakes on ARMs royalty growth. Unfortunately, as ARMs shares currently trade at a forward P/E of 34, even after todays declines,theres little room for disappointment if sales do start to slow.
As ARM falls, AIM darlingMonitise(LSE: MONI)is surging, after American billionaire Leon Coopermanspoke about his shareholding in the company on CNBC.
As a former partner ofGoldman Sachs, manager of a hedge fund with over $6bn of assets and one of the financial worlds most influential investors, the market pays attention to what Cooperman has to say.
So, when the billionaire mentioned that he hadnt sold a single share in the company during the recent sell-off, the market took this as a vote of confidence in the companys business model. Further, Cooperman actually tried to boost his stake recently by buying Visas stake in Monitise. Visa refused to sell at current prices.
Cooperman really believes in Monitises technology and told CNBC that everyone who has taken at look at the companys tech really wants to make use of it. Recent deals between Monitise,IBMandSantanderhave only reinforced Coopermans opinion that the company is a great investment.
Cooperman views Monitise as a long-term investment. The billionaire is well aware that these things take time and hes prepared to wait. Indeed, as Ive covered before, it took Visa over five decades to become the global payments behemoth that it is today. Monitise is expecting to become profitable by 2016, while increasing its number of usersfrom the current level of 30m, to 200m by 2018.
For some, these numbers look ambitious based on Monitises recent performance, but with the help of tech giants such as IBM and banks like Santander, Monitises growth should accelerate over the next few years.
So, if youre willing to wait, Monitise definitely has the potential to grow.
It’s up to you
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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has recommended ARM Holdings. The Motley Fool UK owns shares of Monitise. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.