Thursday, April 21, 2011

Is the era of PCs over?

INTC has been showing up in my screens for a while now as a large market cap dividend yield play. It’s a great company which rewarded it’s investor very handsomely in the last decade of 20th century. See the chart below – the return the investors got in that period was astonishing – 7593% and that too excluding dividends.


Intel chart from year 1989 to 2000

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But has Intel been a good investment in the last decade? Not really. In fact if you invested and held Intel for the last ten years you actually lost money – your return was around –ve 64%


INTC has lost money in the last decade

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And even after a stellar results today and a jump of 7.8% in the stock price it’s still struggling to break through the long term resistant trend line dating back till 2001.


The same is the case for one of Intel’s biggest partners – Microsoft. MSFT hasn’t done too well in the last decade either. Both of these big companies represent the personal computer market. So is the market telling you the era of PCs is over? Let’s compare the stock prices of MSFT, INTC and AAPL to get an insight.


Price comparison for Microsoft, Intel and Apple for the last decade

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If you notice till 2004 none of the stocks were doing well but since then AAPL has significantly outperformed the other two. AAPL defines the new era of personal computing –  smart phones and the tablet devices are definitely catching up and are creating serious disruptions in the marketplace and the stock prices affirm that. Let’s wait and see how things pan out but for now I have to pass INTC even though it showed up in my screens as one of the more attractive dividend yield plays. A 3.4% yield is mouth watering but the long term downtrend is something I cannot ignore.


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