Investors often fixate on a single narrative during earnings season, throwing otherwise solid companies under the bus if a solitary figure doesn’t meet some imaginary expectation made up by Wall Street.
This quarter, the focus is on PCs, or specifically the decline of PC sales. It shouldn’t be a surprise that PC sales are down because it’s been reported for months, but the market still freaked out when both Microsoft Corporation (NASDAQ:MSFT) and Intel Corporation (NASDAQ:INTC) reported soft PC sales. A little perspective and a chill pill may be needed for those overreacting right now.
Three companies that aren’t going away
Microsoft Corporation (NASDAQ:MSFT)’s Windows division sales fell 6% on a non-GAAP basis in the second quarter, but when compared to an 11.4% decline in PC sales, that’s not all that bad. What’s being overlooked are two larger businesses for Microsoft Corporation (NASDAQ:MSFT): Server and Tools and Microsoft Business. Server and Tools sales were up 9% in the second quarter and the Microsoft Business division saw a 14% jump in sales. Even if we pull out sales from onetime upgrade offers, Microsoft Corporation (NASDAQ:MSFT)’s sales were up 3% for the second quarter, not bad considering how bad the PC market is. I’m not saying Microsoft Corporation (NASDAQ:MSFT) is a high-growth company anymore, but projecting its demise is very premature.
Intel Corporation (NASDAQ:INTC)’s story is even more interesting. Revenue was down 5.1% in the second quarter due to a 7.5% decline in PC client sales, the company’s biggest segment, but it may be at an inflection point as it tries to get into mobile. Revenue was up 2% from a quarter ago and next quarter management expects sequential revenue growth of 1.6% to 9.4%. After winning the Samsung Tab 3, the company may be gaining momentum in mobile with a 14 nm chip coming out next year.
Apple Inc. (NASDAQ:AAPL) is another company that can’t seem to wow investors, even with $6.9 billion in quarterly income. A 1% increase in sales won’t get anyone excited, but with a dominant position in smartphone and tablets and a balance sheet that would make most countries drool, Apple Inc. (NASDAQ:AAPL) isn’t going anywhere anytime soon. Let’s not forget the investors in Samsung were also disappointed with sales this quarter, so when we put Apple Inc. (NASDAQ:AAPL)’s slowdown into perspective, it’s not so bad.