Microsoft Corporation (MSFT), Intel Corporation (INTC), Google Inc (GOOG): A Dismal Wintel Second Quarter

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Microsoft Corporation (NASDAQ:MSFT) and Intel Corporation (NASDAQ:INTC) both headed lower after releasing earnings that disappointed Wall Street. Neither company is gaining traction quickly enough in the mobile space. But that’s true of Google Inc (NASDAQ:GOOG), too. The Wintel duo has less downside risk.
Microsoft Corporation (NASDAQ:MSFT)

It’s a PC thing

Microsoft Corporation (NASDAQ:MSFT) and Intel Corporation (NASDAQ:INTC) are the dominant names in the personal computer space. However, advances in computer speed and technology have outstripped customer needs. Even computers that are several generations old can capably surf the net, handle office applications, and check email. There’s little reason for customers to upgrade until they absolutely have to.

And then came the casual computer, otherwise known as a tablet. These handy devices are more portable than a PC, even a laptop, and more than capable of surfing the web and checking email. It isn’t as easy to use them for office work, but they can handle those chores, too, if you want them to.

So now, there’s even less reason to upgrade to the newest PC. Thus, sales have been falling for over a year. That’s a big problem for this pair. And it’s all that investors seem to be focused on right now.

The “Win”

The just ended quarter marked the end of Microsoft Corporation (NASDAQ:MSFT)’s 2013 fiscal year. It earned $2.58 a share versus $2.00 a share in 2012. Although that’s positive, if you take out one-time items, the bottom line fell to $2.62 a share in 2013 from $2.78 a share. Weak PC sales were the main culprit, since the rest of the company’s businesses have been doing relatively well.

That investors are hyper sensitive to the PC market makes sense, however it masks some important shifts being made. First off, the company is moving more and more of its businesses toward the web, with Internet-based offerings like Office 365, Skype, and the Azure cloud platform. And the company is gearing up for the launch of the Xbox One, a new gaming system.

On the PC side, important changes are being made, too, but as Amy Hood, the company CFO, noted during the conference call, “With over 1.5 billion Windows users around the world, a transition of this magnitude takes time.” The big shift is creating a common platform for customers across Windows 8, Windows Mobile, and its Surface tablet offering.

Long-term investors should look at the recent price drop as a second chance to buy Microsoft Corporation (NASDAQ:MSFT) shares on sale. The yield is heading back toward 3% and the company’s outlook isn’t as dismal as the PC industry sales suggest.

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