Established "old" tech companies have been in the media lately in a new way: They've become value stocks and poor performers. Meanwhile, the media -- and investors -- are showing social media companies such as LinkedIn
On Tuesday, The Wall Street Journal tackled this topic. As examples of tech laggards, it cited Cisco
Market Cap (in millions)
Forward P/E Ratio
% EPS Growth Last 12 Months
Source: Capital IQ, a division of Standard & Poor's.
Conspicuous in their absence?
Absent from the Journal's article were IBM
IBM recently celebrated a centennial birthday and could be a tech leader for the next 100 years. Looking nearer term, management has committed to double-digit EPS growth through 2015 and is well-positioned to deliver, even in a slow economy. The stock offers a dividend yield of 1.7%.
Dell's potential over the next five to 100 years is not as promising as IBM's, but whose is? A turnaround since 2005, Dell looks like it's finally making progress. Management has shifted its focus from competing more effectively in PCs to becoming an IT solutions provider with an emphasis on small and medium businesses. The company appears to be resetting EPS at a higher level, which could drive this $17 stock to $26 over the next year or two.
There's reason for low valuations on many "old" tech companies. Cisco and HP are being punished -- hard -- for disappointing earnings and outlooks. Both are in the early stages of attempting turnarounds. Microsoft and Intel are suffering from concerns about PC growth. The health of CEO Steve Jobs is an issue for Apple investors.
Yet painting all mature tech companies with the same brush would be a mistake. IBM and Dell now offer attractive combinations of valuation and earnings growth. An easy way to stay on top of these stocks is The Motley Fool's free My Watchlist feature. You can get up-to-date news and analysis by adding these stocks to your watchlist now:
Fool contributor Cindy Johnson owns shares of Microsoft. The Motley Fool owns shares of International Business Machines, Apple, and Oracle. The Fool owns shares of and has created a bull call spread position on Cisco. The Fool owns shares of and has bought calls on Intel. Motley Fool services have recommended buying shares of Intel, Apple, and Cisco. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Motley Fool newsletter services have recommended creating a diagonal call position in Intel. 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.