Apple vs. Intel: Apple

In the competitive spirit of college basketball's annual championship tournament, The Motley Fool brings you Stock Madness 2007! Our writers are making head-to-head arguments for their chosen stocks (but not necessarily investment recommendations -- this is, after all, a game), and you'll pick the winners with your article recommendations and Motley Fool CAPS ratings. Who will win the right to cut down the net? Let's tip things off and find out!

As much as I love the NCAA basketball tournament, I hate today's NBA. Team players are a thing of the past. One-on-one -- or, for some, one-on-three -- has become like performance art.

Well, I'm not buying. Take me back to the old school. Give me Magic Johnson. Or, just as good, Larry Bird and his Boston Celtics teams of the early 1980s. They were incredibly fun to watch because -- back then -- Bird, D.J., Ainge, McHale, and Parrish could run like the wind.

Larry could run ...
For me, it was the fast break at its best. Crisp, cross-court passes. Baskets made without a single dribble. It was the sort of poetry in motion that Thomas Dolby spoke of in "She Blinded Me With Science."

Which brings me to Apple (NASDAQ:AAPL). The Mac may be just a computer, but to an increasing crowd of loyalists, it's as close as you'll get to poetry in a jumbled box of chips and wires.

A silly notion, you say? Not so fast: According to BusinessWeek and The Boston Consulting Group, Apple is the world's most innovative company. The iEmpire is also the annual recipient of dozens of design awards.

Don't dismiss design as soft science, Fool. Apple's design discipline confers numerous business benefits. And I do mean "discipline." Take its retail stores. CEO Steve Jobs hired Target (NYSE:TGT) merchandising chief Ron Johnson to build a full-size mock-up before opening a single location.

That would prove critical. Only after seeing the mistakes in the mock-up did Jobs and Johnson decide on a complete redesign that resulted in, among other things, the unique in-store service desk known as the Genius Bar.

Today, Apple's stores are a runaway success, accounting for roughly $3.5 billion of the iEmpire's nearly $20 billion in 2006 revenue.

... And so can Steve
That number should grow geometrically in the years to come. Here's why:

No, I'm not suggesting that Apple will one day have 6,000 stores. But the Mac maker has yet to open a location in 16 states. Globally, only the U.S., U.K., Japan, and Canada have Apple stores. Surely it's not a stretch to suggest that Apple will at least double its store count over the next few years? With nearly $12 billion in cash and investments and no debt, doing so shouldn't be too difficult.

Checking the scoreboard
Finally, I'll ask you to remember that in both Stock Madness and March Madness, execution matters most. Forget for a moment about growth rates or price-to-earnings ratios. What team in this contest fast-breaks like the Celtics of old? Which delivers poetry in motion? Is it really Intel (NASDAQ:INTC)?

Of course it isn't. This, after all, is the chipmaker that let Advanced Micro Devices (NYSE:AMD) catch up and surpass it in servers. Even with more than $11 billion in net cash and short-term investments, it won't be easy to close the gap it created.

You might be able to overlook that deficit, if Intel had this contest's most attractive valuation relative to growth prospects. It doesn't. Analysts give the Mac maker a current PEG -- comparing the P/E ratio to projected growth -- of 1.30. Intel, meanwhile, comes in at 1.36.

In essence, this contest offers a chance for you to choose between Bird at his three-point-shooting best and an aging Julius Erving. And the choice should be obvious. Great though he was, Bird often got the best of Dr. J -- including a memorable comeback in the 1981 Eastern Conference Finals on the way to the NBA title. Apple, similarly talented, ought to have enough to continue a title run of its own.

Convinced? If so, follow this link and rank Apple to "outperform" in Motley Fool CAPS. Later this week, our editors will tally your votes to determine which stocks will advance one step closer to the title.

Read our opposing entry on Intel, and see all our articles in the tournament.

Think you could pitch your favorite stock -- or ditch your least favorite -- in 27 seconds or less? That's what we're doing over at Motley Fool CAPS. Check out our new stock videos.

Fool contributor Tim Beyers, who is ranked 1,426 out of more than 24,900 in our Motley Fool CAPS investor-intelligence database, wrote this article on his MacBook Pro but didn't own shares in any of the stocks mentioned in this article at the time of publication. All of his portfolio holdings can be found at Tim's Fool profile. His thoughts on Foolishness and investing may be found in his blog. Best Buy is a Stock Advisor pick. Intel is an Inside Value recommendation. The Motley Fool's disclosure policy, like the old Mac Cube, is irresistibly shiny.