The Case for Microsoft Corporation (NASDAQ:MSFT)
Microsoft’s fate is tied to that of its Windows operating system, but the bulls note there is far more to the company than that. Systems like Sharepoint can lock in server revenues for years. Microsoft Corporation (NASDAQ:MSFT) leads the game console market with its Xbox, and the Kinect interface is seen as a great candidate for expanded use in mobile devices and robots.
Still, much of the bullish analysis of Microsoft has grown technical, which is fundamentally bearish. Technical buyers don’t buy-and-hold, they buy-and-sell. Windows has been around for over two decades, and it has many applications, increasing system vulnerability. Its efforts in phones and tablets have, like Intel’s been unavailing.
To be bullish on Microsoft you have to simultaneously believe that Windows has growth potential and that it doesn’t matter as it did. I can believe 5 impossible things before breakfast, but I no longer believe in Microsoft Corporation (NASDAQ:MSFT).
The Case for Apple Inc. (NASDAQ:AAPL)
Apple was the last of the angels to fall, and thus it has more believers left than the others.
As many analysts note, the company may just be a product announcement away from new glory. Reports of an Apple watch, or TV, are seized by the bulls to mean the glory days are ahead of it, not behind.
The problem here, as with the other fallen angels, is mainly the law of large numbers. When you have sales of $54 billion/year, you have to sell $54 billion more the next year just to stay even. The bigger numbers get, the harder they are to improve. Once sky-high margins naturally fall, and now look like a glide path toward 25%.
As product categories mature, you want thinner margins to maintain share. Samsung is killing Apple in phones not because its devices are better, but because Samsung is willing to sell them for less.
So Where Does the Money Go?
You can see my own view in the disclosure. I’m with Apple. I sold out my stakes in Intel and Microsoft last year, but I’m keeping the Apple shares.
No other company can support a weekly rumor column, because few companies have so many rumors worth caring about. The company’s stock hoard can support a fat, fat dividend for years to come.
Still, I no longer have the absolute faith in Apple I had before. If the stock were to rise to about $600, I’d be out of it. And I wouldn’t mind taking some profits at prices as low as $540.
There’s a truism in life as well as investing. You’re only young once. Rebirth is only for those companies willing to completely jettison the past to embrace new futures, like General Electric Company (NYSE:GE).
The article Which of Tech’s Fallen Angels Will Rise Again? originally appeared on Fool.com and is written by Dana Blankenhorn.
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