Technology moves so quickly, and competition is so fierce, that today's top dog could soon wind up in the doghouse. It can be hard to pick out a company you can trust for the long term, let alone one that can be easily understood if you're a non-technical sort. A few outliers have beaten the odds and planted their flags atop an industry. But there is one company that's so indispensable and so well positioned that it can outlast any paradigm shift. It might even be the one creating that shift in the first place.
Contenders and pretenders
Remember how excited everyone was about AOL in the '90s, and the boundless potential inherent in connecting the world to the Internet? Getting online is more likely to be handled by your local cable provider these days. Remember Zip drives? I had one for a year or two until CD burners came out. That paradigm shifted fast.
The average surviving public high-tech company is 28 years old, a number skewed somewhat by the longevity of last century's stalwarts, which no longer much resemble their early selves. Plenty of companies make a big splash and fade out quickly.
Show me the numbers
The companies I'd like to look at should be well known to anyone who's spent even a few minutes online. You've almost certainly used their products at one point or another. Let's take a quick glance at their numbers to see how they stack up.
|
Company |
P/E |
5-Year Revenue Growth |
5-Year Annualized Share-Price Growth |
Dividend Yield |
|---|---|---|---|---|
|
Apple |
14.9 | 492.2% | 42.6% | None |
|
Microsoft |
11.4 | 45.4% | 3.8% | 2.5% |
|
Google |
20.5 | 215.5% | 5.6% | None |
|
Intel |
11.2 | 53% | 8.2% | 3.1% |
Sources: Yahoo! Finance and YCharts.
There's a compelling case to be made for all five, and you might already have one or more in your portfolio. But which one can hang on for the long haul, and why?
Batters on deck
Apple is the biggest tech company in the world right now. But there's no guarantee that its hot hand will play out forever. Remember the last time Steve Jobs left the company? Apple didn't die, but it got left behind during the bull run of the '90s. Ambitious new products fell flat because the company's brain trust misread the market or priced the company out of it. It would be almost suicidal to bet against Apple today. But when you want to look to the longest term, consumer-electronics companies are always -- no matter how massive -- at risk of disruption.
How about Microsoft? The yin to Apple's yang is in the fight for its life as the world transitions away from the personal computers that made its fortune. Yes, it's diversified, with its Xboxes and cloud offerings and mobile partnerships and crazy-ambitious research projects. But there's no guarantee that any of these efforts will do any more than keep the ship sailing. Microsoft founder Bill Gates has been dumping shares by the millions, reducing his stake by 22% over the past two years. He could want more seed money for his global philanthropy. Or he could see the writing on the digital wall.
Apple and Microsoft are locked with Google in a three-way war for the global consumer. Now that it's finally digested Motorola Mobility, Big G's bolstered patent hoard represents a major threat to Apple's dominance and Microsoft's ascension. Few companies are as engaged in moon-shot research, which could push Google forward past the days of search engines and keyword advertising. But as Microsoft's spotty research track record shows, there's no such thing as a sure thing. Semantic search (think Siri) could hobble Google's cash cow, or at least significantly crimp its growth going forward. And then there's Facebook.
Swing for the fences
What do all of these companies have in common? All use and rely on Intel processors for significant parts of their business. Apple's Macs have Intel inside. Microsoft and Intel have been the dominant PC tag team since the '80s. Google's many, many servers run on Intel processors.
There are a number of other reasons Intel is a lifetime pick. I could never cover them all in this article, but I've already covered many in an article on why Intel should be a core stock. Here are a few highlights:
- It's the world's largest semiconductor manufacturer.
- It has a minimum 75% share of desktop, server, and laptop processors, and a global microprocessor share of 84%.
- It came from behind to dominate PCs and servers, taking on entrenched competitors and thoroughly outflanking them.
- Intel's stock price has grown an average of 15.3% each year for the past two decades, and dividends have grown 24.8% each year, on average.
- 3-D transistor technology should make Intel chips at least as power-efficient as leading mobile processors designed by ARM Holdings
(Nasdaq: ARMH) - Intel's manufacturing processes are the best in the industry.
- It's the world's only fully integrated processor manufacturer.
Demand for chips isn't going to go away unless we have some kind of Luddite revolution. If that ever happens, you'll have bigger things to worry about than your Intel stock. There will always be threats and competition; that's without question. But Intel's shown great ability to adapt and conquer new markets before, and its leading position gives it resources smaller players could only dream of. Let's not forget its healthy dividend, either. Taken all together, there are a whole lot of great reasons to make Intel a high-tech pick for a lifetime.
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