The tech sector kicked off 2012 by carrying the markets higher. However, uncertainty has begun to boil over amid European economic concerns, and technology stocks are feeling the heat. In its most recent round of earnings reports, data-storage giant NetApp
Value in the tech space
Topping my list is the world's most valuable tech company. Shares of Apple
But the real home run for Apple will be in making its new iPhones compatible with the China Mobile
Meanwhile, the rumored Apple HDTV highlights another bright prospect for the tech titan. Reports released earlier this week suggest that the company will showcase a new operating system at the World Wide Developers Conference next week. This specially designed OS could be enhanced for powering a so-called Smart TV. While this is largely speculative at this point, an Apple TV would mean one more gateway device to Apple's rich media ecosystem. In fact, where Apple shines is in molding ecosystems around its products.
A real steal
Another company that's building up its content ecosystem is Microsoft
Microsoft's Xbox gaming console was always able to play DVDs and stream media content for members of its Xbox Live service. But with the addition of Xbox SmartGlass, users can now share content and control multiple TVs from their smartphone or tablet devices. This should create a more seamless user experience, particularly because the technology will work with a variety of products, including iPhones and iPads. Microsoft also plans to roll out Windows 8 later this year, which should contribute to the company's remarkable ability to generate mounds of cash flow.
But that's not all. An army of Windows-based smartphones provides additional upside for Microsoft. The company's partnership with Nokia marks an attempt to increase its 4% stake in the booming smartphone market. True, the Windows-powered Nokia Lumia 900 got off to a rough start. However, I suspect the upcoming launch of Windows 8 will help Microsoft attract the attention of mobile carriers.
By the numbers
Apple and Microsoft both look dazzling on paper. Each of these stocks trades at just 10 times forward earnings, and both generate high free cash flows with P/FCF multiples of 11. The appeal of these companies will continue to thrive for years to come. I think these stocks look attractive at their current prices, and I plan to build my positions in them going forward.
I've been an Apple advocate for the past decade, and now I'm adding Microsoft to my most-wanted list. While Microsoft's stock performance has been relatively flat in recent years, I think it will surprise investors in the year ahead. That's why I'm giving Microsoft a three-year outperform rating on my profile in Motley Fool CAPS. You can still find value in the tech sector even as the market stumbles. Discover the next big technology up-and-comer in this free report from The Motley Fool's top analysts. Get your copy now -- it's free.
Fool contributor Tamara Rutter owns shares of Apple. Follow her on Twitter, where she uses the handle @TamaraRutter, for more Foolish insights and investing advice. The Motley Fool owns shares of Microsoft, China Mobile, Cisco Systems, and Apple. Motley Fool newsletter services have recommended buying shares of and creating bull call spread positions in Microsoft and Apple. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.