Hewlett-Packard Company (HPQ), Intel Corporation (INTC): Is a Turnaround in Tech Possible?

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Avoiding hardware


One of best ways to play the tech industry, while avoiding the PC hardware business, includes International Business Machines Corp. (NYSE:IBM), which is a global IT services and software company.

The global operations also help hedge the company. The Americas make up 44% of sales, EMEA (Europe, Middle East and Africa) 31%, and Asia Pacific 25%. The other nice thing is that IBM is looking to boost exposure to the fast-growing emerging nations. In 2012, the BRIC nations’ — Brazil, Russia, India and China — sales grew 7%.

Helping to drive International Business Machines Corp. (NYSE:IBM) over the long term should be a return of IT spending by companies. IT budgets should begin to loosen as companies look to find new ways to utilize technology to decrease costs.

Bottom line

Hewlett-Packard Company (NYSE:HPQ) pays a solid 2.1% dividend yield, where IBM pays a 1.9% yield. Intel Corporation (NASDAQ:INTC) pays the best yield at approximately 3.9%. The Dell buyout action has given hope to HP investors. I am a fan of the HP turnaround, especially with the likes of Relational as a big investor, however, I’m not a buyer at current levels.

HP is trading near 7 times earnings, but when you couple that with analysts’ five- year expected EPS growth rate of 1.7%, the cheap valuation might just be a value trap for now. I do, however, like Intel Corporation (NASDAQ:INTC) for the dividend and International Business Machines Corp. (NYSE:IBM) for its high returns on equity and exposure to the high-margin services business.

The article Is a Turnaround in Tech Possible? originally appeared on Fool.com and is written by Marshall Hargrave.

Marshall Hargrave has no position in any stocks mentioned. The Motley Fool recommends Intel. The Motley Fool owns shares of Intel and International Business Machines. Marshall is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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