Apple Inc. (AAPL), Microsoft Corporation (MSFT), Cisco Systems, Inc. (CSCO), Intel Corporation (INTC): Why Big Profits Are Coming in at These Tech Giants

Like me, there are many people who think of Intel every time they turn on their computer and see the little decal on it that says: “Intel inside”. Intel dominates the market for computer processor chips and stays on the leading edge of the industry with massive capital spending from its enormous cash flow. Even though demand is slowing for desktop and laptop computers, it is still a massive market and will be with us for years to come.

Intel does understand the need to change with trends in the market and is now quite successfully offering its excess manufacturing capacity to fabless chip designers and mobile device makers. The beauty of this strategy is that they are simply selling capacity within buildings and equipment that already exists during times when the equipment is currently not in use. This practice increases return on capital and assets and floods the bottom line with profits since the only requirement is to run the existing equipment more. With a price to cash flow multiple 64% below the market, price to earnings multiple 38% below the market and a business that dominates its industry, Intel is simply a steal at the current price.

The Backbone of the Internet

It is hard to believe that a business commonly referred to as the “backbone of the Internet” could be valued 39% below the market average P/E ratio but that is exactly where Cisco Systems sits today with a forward P/E of 11. Even more shocking is that its price to cash flow multiple would have to rise over 70% to equal that of the index.

Cisco will be heavily involved in building the servers and networks that will be critical to the successful movement to cloud computing and will be indispensable in the coming upgrades required to keep the Internet functioning and viable.

Foolish Actions or Foolish Actions

Fools (big F) will rush in now and buy all four of these technology giants while the prices remain at foolish (little f) levels.

The article Why Big Profits Are Coming in at These Tech Giants originally appeared on Fool.com.

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Related tickers: Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), Cisco Systems, Inc. (NASDAQ:CSCO), Intel Corporation (NASDAQ:INTC)