Long Live the PC: Intel's Rally is Pulling Microsoft and Hewlett-Packard Higher

Shares of PC giants Intel, Microsoft, and Hewlett-Packard are surging on Friday.

Jun 13, 2014 at 11:30AM
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The Dow Jones Industrial Average (DJINDICES:^DJI) had risen more than 48 points as of 11:30 a.m. EDT. Intel (NASDAQ:INTC) and Microsoft (NASDAQ:MSFT) were among the index's best performers, while ex-Dow component Hewlett-Packard (NYSE:HPQ) was also moving to the upside.

Producer Price Index disappoints
The U.S. Bureau of Labor Statistics on Friday said the Producer Price Index, a measure of inflation in the supply chain, declined by 0.2% month over month in May. Economists had anticipated a modest gain of 0.1%.

A lower than expected PPI suggests a weaker than expected economy. Although runaway inflation comes with its own issues, rising prices may indicate a stronger economy. 

Intel raises its guidance
Intel was the Dow Jones' biggest gainer on Friday, rising more than 7% in late-morning. The gain comes after the PC chipmaker released a stronger earnings guidance that includes a projected $700 million more in second-quarter revenue than it had previously expected.

Intel is benefiting from robust corporate demand for personal computers. Although mobile devices may have captivated consumers, businesses and corporate users are still largely dependent on traditional PCs -- and that's a market where Intel dominates. 

At the same time, Intel's new 2-in-1 designs may be taking a chunk of the tablet market. These new laptop/tablet hybrids offer the benefits of both systems with a single device.

Microsoft

Source: Wikimedia Commons.

Microsoft and Hewlett-Packard could be poised to benefit
Part of reason Intel is seeing more demand from corporate users is the end of Windows XP. Earlier this year, Microsoft ended its support for the 14-year-old operating system. Windows XP continues to function, but Microsoft will no longer release security fixes, making it risky to continue using the OS.

Businesses may now be buying new PCs with a newer version of Microsoft's operating system installed. That could result in more Windows revenue for Microsoft, which may be why investors are buying up shares on Friday.

Every company in the Windows-PC value chain should benefit, including OEMs like Hewlett-Packard. The company's shares rose nearly 4%, as investors may have been projecting Intel's stronger revenues onto HP.

Hewlett-Packard's personal systems business, which is largely composed of traditional PCs, generates more than a quarter of company revenue.

Other factors could be helping Hewlett-Packard shares: Earlier this week, the company detailed its new supercomputer, "The Machine." The device, if it succeeds, could revolutionize the data center, replacing a host of servers with a single computer. Its an ambitious move, as The Machine uses an entirely new operating system and new architecture, but it's an exiciting prospect Hewlett-Packard investors may be keying in on.

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Sam Mattera has no position in any stocks mentioned. The Motley Fool recommends Intel. The Motley Fool owns shares of Intel and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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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