How Intel and Microsoft Led the Dow Lower Today

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

If you take a look at the Dow Jones Industrial Average (DJINDICES: ^DJI  ) today, you'll find that two of the index's three worst performers come from the tech sector. Not only that, but the biggest losers team up to form the famous Wintel duo. Microsoft (NASDAQ: MSFT  ) , the inventor of the Windows operating system, plunged as much as 2.4% overnight, while Intel (NASDAQ: INTC  ) lost 1.9% at most.

These two stocks often fall and rise in tandem based on the same catalysts, but that's not the case today. Intel is falling for one distinct reason; Microsoft shares suffer from a different malaise.

Personnel issues
For Intel, it's a pretty clear-cut reaction to bad news from the executive suite. David "Dadi" Perlmutter, Intel's chief of architecture (chip designs, not buildings), is leaving Intel in February to close out a career spanning more than three decades.

David Perlmutter, soon to be former head of Intel's architecture group. Image source: Intel.

Perlmutter has been a driving force behind Intel's microprocessor design choices since the early 1990s. When he directed the development of the Pentium Pro and Pentium II processors. He's an industry legend who had his sights on Intel's CEO office when Paul Otellini retired earlier this year.

But he was passed over for then-COO Brian Krzanich, who immediately reduced Perlmutter's power base within Intel. Today's resignation might be seen as the endgame to Intel's CEO search, pushing one highly qualified candidate away in bitter disappointment.

Intel will have Perlmutter on board to smooth out the transition until February, so it's not a clean break with a boot print on Dadi's backside. Still, Intel is losing a valuable human resource and heading into uncharted waters when it comes to big-picture architecture choices. Investors are feeling the pain today.

Worrying about the near future
For Microsoft, the pain points are twofold.

First, Microsoft's brand-new Surface 2 tablet launched to widespread indifference. According to Global Equities Research analyst Trip Chowdhry, early sales of the new tablet were "lukewarm" and Microsoft stores in Silicon valley saw "extremely light" foot traffic.

If this was Microsoft's attempt to steal the thunder from Apple's (NASDAQ: AAPL  ) unveiling of its latest iPad updates on the same day, it was a miserable failure.

Apple CEO Tim Cook did take a few seconds out of his iPad presentation to poke fun at competing tablets, and Microsoft's Surface line specifically. I guess that's a win if you believe that "any publicity is good publicity," but Microsoft investors don't -- and shouldn't -- see it that way. Any reasonable way you slice the Surface 2 launch, Apple walks away as the clear winner in this duel over consumer hearts and minds.

Furthermore, Microsoft investors are bracing for even more bad news on Thursday night. That's when Microsoft reports second-quarter results, and early signs don't look good.

Analyst estimates point to earnings of $0.54 per share on $17.8 billion in sales. That would be an almost flat bottom-line performance compared to the year-ago period, along with 11% higher revenue. But those earnings estimates have been lowered from $0.56 per share over the last two months, and Intel didn't provide much comfort in last week's earnings update.

Microsoft is setting itself up to beat current expectations but follow up with weak guidance for the crucial holiday quarter -- just like Intel. Investors' nerves are starting to rattle, and it shows in Microsoft's share prices.

That's how Intel and Microsoft came to lead the Dow downward today, along very different paths.

That smarts! Where can my portfolio find a safer long-term haven?
The tech sector beckons with promises of quick profits, but the downside can arrive just as swiftly. It's best to take the extra- long view of your investment options, and Silicon Valley isn't always the best place to start. If you're looking for some long-term investing ideas, you're invited to check out The Motley Fool's brand-new special report, "The 3 Dow Stocks Dividend Investors Need." It's absolutely free, so simply click here now and get your copy today.


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  • Report this Comment On October 23, 2013, at 4:12 PM, stretcho44 wrote:

    This is pretty funny stuff.

    The DJI 30 is a price weighted average and there were 12 of the 30 components that finished farther off than Intel and therefore contributed more than Intel did to the drop. Finishing #13 of 30 is not exactly a leadership position. The middle would seem to be rather neutral.

    CAT, GS, V, MMM, MCD and UNH and UNH all contributed more than MSFT.

    DIS, JPM, WMT, TRV, CSCO and XOM also, all contributed more than INTC.

    Intel was reacting to the Altera Q3 results that were released yesterday afternoon. Semiconductor stocks were doing terrible and had NOTHING to do with WINTEL. Atlera lead the way down by 13.7% and Intel held up EXTREMELY well in a down market with a negative focus on semiconductors.

    ALTR down 13.7%

    XLNX down 3.2%

    BRCM down 3.4%

    QCOM down 2.8%

    INTC down 1.2%

    .

  • Report this Comment On October 24, 2013, at 9:53 AM, Paytheon wrote:

    Some cut throat activities going on at Intel. Perhaps the real reason Dadi is leaving Intel is because he's a dinosaur who's days came to an end? Intel needs to move forward and most of all ... Intel needs to build and release new innovative products under their brand name. Intel needs to figure out their OEM's are starting to build their own chips, thus Intel needs to build their own products.

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