Intel (NASDAQ:INTC) ended last week's trading by posting brand new 10 year highs. The abnormal spike in Intel's share price came as a product of the company releasing updated guidance last week where it boosted both revenue guidance and heavily coveted margin guidance. The company cited the PC market bottoming as another major factor for the upgraded numbers.
For quarter after quarter, we've watched the PC market decline at the hands of the tablet and mobile market. Intel's stock has been performing decently, but the cloud hanging over its head was the constant decline in PC sales with Intel's limited footprint in mobile and tablet. The company has undertook measures to try and play catch up in both tablet and mobile, but revenue from PC chip sales continues to be the driving force behind the company.
Intel's performance and PC sales can be both considered importance gauges for both Microsoft (NASDAQ:MSFT) and Hewlett-Packard (NYSE:HPQ). For Microsoft, it'll likely tell some of the tale of how Windows and Surface sales could perform in the near future. For Hewlett-Packard, a company that relies on PC sales in addition to its printers and peripherals, it's equally as telling.
On the "Surface" of success
The timing certainly is ripe for Microsoft, who in releasing their new Surface 3, look to bridge the gap between tablet and PC. A bottom in the PC market could benefit Microsoft's "specialty" group where the Surface 3 sits, and it could be right on time. Microsoft's Surface 3 is set to become available before the end of June in U.S. and Canada.
Microsoft, who has pinned its product up against Apple's (NASDAQ:AAPL) MacBook Air, could use the momentum of a bottoming PC market to their advantage. Apple, like Lenovo, is one of the few companies that didn't find itself negatively effected by the downturn in PC sales. Both Lenovo's, and Apple's PC market share have either held steady or grown while companies like Intel, Microsoft and Hewlett-Packard found themselves struggling. The "Surface 3 timing advantage" also has the potential to transfer itself onto Microsoft shareholders, as good Surface 3 sales will continue to help Microsoft's top line and further the company's non-traditional image as a hardware producer.
Along those same lines, the Financial Times noted that HP's stock growth has also been a result of a similar trend in the PC market. HP shares continued their year-long ascent, touching the highest level since 2011 after figures from Gartner showed the computer maker gaining market share and a broker initiated coverage of the company with a 'buy' rating.
First-quarter data from the analytics company indicated the severity of declines in the PC market had eased with global shipments of HP computers rising 4 per cent from a year earlier to 12.2m.
The question becomes: can HP and Microsoft benefit from the sector wide improvement in PC sales? This Fool thinks they both can, but that Intel has likely run its course for the short term.
This Fool thinks the Intel bull has run its course...for now
I believe that Intel has run its course for the time being. As a stock that doesn't normally trade with 7% swings, let alone 2-3% swings in a day, getting behind Intel at this point is likely going to be chasing; unless your plans are for holding for the very long term. Intel's 3.3% yield makes it a prime candidate to have a place in a dividend portfolio.
Bears seem to have the right idea, however, thinking that some of the rebound in the PC market is due to Microsoft ceasing support for Windows XP and businesses subsequently taking that as a cue to purchase new systems. I remain cautious trying to trade Intel for the short term, but think that Microsoft and HP shareholders certainly could stand to benefit.
Christopher Irons is long Apple. The Motley Fool recommends Apple and Intel. The Motley Fool owns shares of Apple, 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.