Novice Investing - Wintel Dinosaur

Date: Monday 01st 2008f December 2008 05:07:50 PM

Wintel Dinosaur - 04/28/2006

By: Novice Investing Staff

Business has not been kind to Window's creator, Microsoft Inc. (MSFT) and its microprocessor counterpart, Intel Corporation (INTC). Each has a problem on its own. Microsoft has been battling Google and Linux's player in the internet and software space. Meanwhile, Intel gets smacked around from its little pesky competitor, Advanced Micro Device (AMD). Both seems to be struggling mightily judging from their latest earning reports.

Intel's problem has been prolonged for more than a year now. It began when its smaller rival introduced a dual core PC microprocessor. At the time, Intel dismissed the threat and think that it won't matter much for consumers. This is management's ignorance, which is responsible for Intel's stock drop. After one year behind the curve, Intel finally releases its own dual core microprocessor. Furthermore, realizing its bloated cost structure, Intel finally decided to tighten the belt and cut its workforce by 2 to 3 percent, mainly through attrition.

Microsoft, which has a battle of its own, does not fare too well either. During its earning report on April 27th 2006, Microsoft plans to boost spending by an additional $ 2 Billion. For that purpose, earning will be reduced in the short term. To be honest, Microsoft needs to spend money sooner or later. In the search engine arena, it is way behind market leader Google Inc. in terms of search quality and online advertising.

Both Microsoft and Intel were the darlings of the 1990s and market rewarded rich valuation for their continued earning growth. For the past several years, market participants seem to think that their best days are over and earning multiple came down to the low teens. Not that they are going to be out of business anytime soon but their stock look like struggling dinosaur for now. Balance sheet wise, Microsoft owns a $ 4.16 per share positive net cash while Intel has $ 1.87 per share of positive net cash.

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Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding Intel Corp. or any other securities.

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