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Smartwatches Make Me Want To Buy ARM Holdings plc

I’ve always been a fan of watches, and the recent release of a smartwatch by Samsung has made me rather intrigued.

It acts as a ‘companion’ to a Samsung smartphone, and allows users to check emails, read texts, take pictures with its camera and also listen to music. It will go on sale across the world priced at $299.

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Of course, the inevitable question is: why bother getting one? As far as I can see, it performs exactly the same functions as a smartphone but on a more limited basis, leading me to also ask why not just keep your smartphone in your pocket and use that?

However, just as other technology products have initially seemed to be of limited use, the smartwatch may yet find its customer base. For instance, gym-goers and sports players may find it useful for assessing their performance, while listening to music from a watch rather than a phone may prove to be less cumbersome.

Anyway, it will be fascinating to see how it performs and, as a private investor, I’m interested to know how I can potentially benefit from further releases in the ‘wearable technology’ sector.

One company that could be a means for me to benefit is ARM (LSE: ARM) (NASDAQ: ARMH.US). With Apple mulling over the release of its own smartwatch, ARM could be poised to develop the technology to push it onto another level, just as it has done with the iPhone and various other technology products.

Indeed, the UK-based technology company is a world-leading semiconductor intellectual property supplier, focusing on the design and licensing of intellectual property rather than the manufacture of physical semiconductor chips.

This, in my view, makes the business even more valuable and explains why ARM remains successful: it has an ability to set the pace and drive change in the technology space, achieving sky-high margins and being an integral player in much of the technology we use on a day-to-day basis.

Certainly, focusing on the price-to-earnings (P/E) ratio would lead investors to conclude that shares are expensive, with them currently trading on a P/E ratio of 64. However, when earnings growth forecasts of 40% this year and 23% next year are taken into account, ARM does not look so expensive, with the company having a price-to-earnings growth (PEG) ratio of just over 2.

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> Peter does not own shares in ARM. The Motley Fool owns shares in Apple.

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