Why Intel and Microsoft Led the Dow Higher This Week

Microsoft and Intel lead the Dow Jones Industrial Average higher as their respective strategic initiatives begin to pay-off.

Jun 1, 2014 at 9:00AM

The Dow Jones Industrial Average (DJINDICES:^DJI) powered higher this week, closing up 111 points, or 0.67%, near all-time highs. Although some investors remain cautious on expectations of a meaningful correction in the Dow, the bull market appears to be fully intact, particularly as corporate earnings continue to be healthy. Last week, tech giants Microsoft (NASDAQ:MSFT) and Intel (NASDAQ:INTC) moved up nicely as they both announced significant progress in their respective transformation strategies.

Satya

Source: Wikimedia Commons.

Microsoft was up 2.04%, with most of the week's gains coming the day after it announced its strategic partnership with cloud software giant salesforce.com (NYSE:CRM). In this deal, Microsoft and Salesforce will be brining Salesforce's Salesforce1 mobile interface to both Windows and Windows Phone devices, helping to bolster the corporate appeal of both Microsoft platforms. Further, the two companies aim to bring Salesforce to Office 365, which will allow for interesting things like a Salesforce app for Outlook and the ability to easily bring Salesforce data to Excel and Power BI. With this move, Microsoft takes another step forward to realizing its vision to transform itself into a devices and services company.

Zenfone

Intel hasn't found its chips in too many phones, but phones like the ASUS ZenFone family represent a good start. Source: ASUS.

Intel was up 3.91% as investors seemed to cheer the company's recent strategic partnership with Chinese chipmaker Rockchip. In this deal, Intel and Rockchip will collaborate to bring a 3G-capable, integrated system-on-chip intended for low-cost tablets running Google's (NASDAQ:GOOG) Android operating system. While the financial impact of this deal is likely to be neither imminent nor large, it does underscore a fundamental shift toward market oriented pragmatism that the company's executives have preached for so long. With the company's mobile efforts continue to bleed money, losing over $3 billion in 2013 with a wider loss expected in 2014, investors are looking for dramatic improvements in 2015 and beyond. 

While Intel and Microsoft were notable outperformers last week as they both made solid progress against their respective strategic efforts, it'll be important to watch for continued, consistent progress from both of them. Over the long haul, both of these stocks have not performed well, under-performing the Dow over both the last five years as well as the last ten. It's hard, then, to fault investors for being skeptical of buying either company's stock individually over, say, an ETF that tracks the Dow.

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Ashraf Eassa owns shares of Intel. The Motley Fool recommends Google (A and C shares), Intel, and salesforce.com and owns shares of Google (A and C shares), Intel, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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