A bad sign
Microsoft Corporation (NASDAQ:MSFT) recently released a new version of its Windows PC operating system. Historically, that would have led to a jump in computer sales as customers upgraded to the newest and best. That clearly didn’t happen. In fact, Bob O’Donnell of IDC commented that: “…it seems clear that the Windows 8 launch not only failed to provide a positive boost to the PC market, but appears to have slowed the market.”
That is a pretty damning assessment of the new Windows OS. However, it may be spot on because Microsoft Corporation (NASDAQ:MSFT) made big changes in an effort to merge the PC experience with the tablet experience. It also just launched its own tablet. Customers don’t like change.
A bad image
So, Microsoft Corporation (NASDAQ:MSFT) isn’t looking too good right now in the PC space. But the company is far more than just its operating system. It has notable products in the software and video game space, for example. Also, it has offerings that help to run the backbone of the Internet. While its OS product is an important cash cow, there’s plenty more meat to sink your teeth into.
Most recently, the company’s foray into the mobile OS space with Nokia Corporation (ADR) (NYSE:NOK) has been an important step. The Lumia has been a good showcase for both companies and has given Microsoft a viable mobile OS offering.
It’s way too soon to count Microsoft Corporation (NASDAQ:MSFT) out, especially since the top and bottom lines continue to be quite strong. With a dividend yield in the 3% range and a history of annual dividend increases, investors should view this as a chance to get aboard a technology leader.
The partner
Intel is Microsoft Corporation (NASDAQ:MSFT)’s partner in the PC market, providing the brains behind the vast majority of the PCs sold. Historically that’s been a good business for the company, but is obviously a drag at the moment. Its shares, however, have been languishing for quite some time.
Intel’s lack of exposure to the mobile market is the culprit. Add in the weak PC market and it’s understandable that investors would be concerned about the chip giant’s future. That future, however, probably isn’t going to be nearly as bleak as the company’s share price and over 4% dividend yield suggest.
For example, although late to the party, Intel Corporation (NASDAQ:INTC) is working with Google Inc (NASDAQ:GOOG) on chips to support that company’s ubiquitous Android mobile operating system. That’s not a guarantee of success, but it gives the chip giant a viable product to sell into a large potential customer base.
In addition, Intel Corporation (NASDAQ:INTC) chips power more than just PCs. They also power the computers that provide the backbone to the Internet. All of the tablets being sold instead of computers are being used to send email, visit websites, stream movies and music, and keep up with friends on a social network. None of that happens without a huge number of computers on the other end of the transaction.
Intel Corporation (NASDAQ:INTC) is well worth the risk as it pushes into mobile and continues to support the infrastructure that makes tablets and cell phones so desirable.
Not so well positioned
One company best avoided, however, is Advanced Micro Devices, Inc. (NYSE:AMD). The company has always been an also ran in the PC chip market, competing mainly by selling cheaper chips. That hasn’t worked particularly well so far, resulting in a corporate reshuffle and jettisoning of the company’s manufacturing operations.
Now just a design firm, management has been looking to diversify into other products, like set-top boxes. That looks more like a sign of desperation than strength. Investors should avoid this chip also ran. Intel Corporation (NASDAQ:INTC) is financially stronger and enjoys too many benefits from its larger scale to give Advanced Micro Devices, Inc. (NYSE:AMD) a fighting chance.
WinTel, part two
Intel Corporation (NASDAQ:INTC) and Microsoft Corporation (NASDAQ:MSFT) probably won’t find their paths as tightly connected in the future. However, both still play important roles in the technology space. The current slowdown in the PC business will hurt, but certainly won’t kill these tech giants. That makes the recent malaise an investment opportunity.
The article The PC Is Dead: Buy WinTel originally appeared on Fool.com and is written by Reuben Brewer.
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