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Why I Would Buy Tech Giants ARM Holdings plc And Paypoint plc Over Pace plc

Despite the release of a murky trading update in Friday business, set-top box manufacturer Pace (LSE: PIC) has avoided the wrath of the market and is only very slightly down from last night’s close.

The company advised that due to “continuing challenging economic conditions in certain regions, phasing delays at major customers in North America and delayed decisions by customers,” it has been forced to scale back its revenues expectations for the full year.

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Pace now expects sales to clock in at $2.55bn in 2015, down from $2.62bn last year and a hefty downgrade from its previous revenues prediction of between $2.65bn and $2.72bn.

 In better news Pace kept its forecasts for adjusted earnings before interest, tax and appreciation stable at $255m, up from $241.1m in 2014. The Yorkshire-based business also confirmed that its touted $1.4bn takeover by US-based Arris Group “continues to progress in-line with expectations and … is expected to close in late 2015.”

The chips are up

But while Pace advised performance should pick up during the second half of 2015, thanks to a better product mix and improving supply chain, I believe the company lacks the rosy revenues outlook over at ARM Holdings (LSE: ARM). While it is true that Pace is a big player in the TV and broadband technology markets, it does not carry the same weight with blue-chip customers as the mobile microchip designer.

Fears of saturation in the critical smartphone and tablet PC markets has prompted much head-scratching over whether ARM Holdings can maintain the breakneck earnings growth of previous years. But thanks to its alliance with industry giants like Apple, and increasingly with the fast-growing manufacturers of China, I believe the Cambridge firm is in great shape to continue heading off the charge of competitors like Intel.

On top of this, ARM Holdings is also making steady headway in the networking and servers segments, which are red-hot growth markets in their own right. Indeed, the business advised just this week that it expects its chips to be in 25% of all servers within the next five years.

A strong selling point

And I am also more positive on payment specialist PayPoint’s (LSE: PAY) sales outlook than that of Pace, thanks to its hefty presence on the UK High Street.

The business currently operates from 27,800 retail outlets up and down the country, including both supermarket giants, like Tesco and Sainsbury, and independent retailers, and provides a variety of services — from accepting bill payments and zipping money across the globe, through to topping up pre-paid cash cards, PayPoint has its fingers in many pies.

PayPoint saw UK and Irish retail transactions leap 24% during April–June, a result that helped group transactions clip 6% higher in the period, to 201.6m. With the firm also making progress in divesting its underperforming online and mobile divisions, I believe earnings at PayPoint should step comfortably higher in the years ahead.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK owns shares of PayPoint. The Motley Fool UK has recommended ARM Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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