The PC market is poised to start a new cycle of growth. Sure, PC sales dropped in recent quarters, but this is due to consumers and businesses waiting for Windows 8. Microsoft (MSFT) finally succeeded in selling more Windows 7 operating systems than XP, but the company is aware of the importance of mobile computing. Windows Phone 8 ties users back to the desktop (Windows 8), entertainment (Xbox), and the cloud (Hotmail and SkyDrive).
In anticipation of the Windows 8 and Microsoft Surface Tablet release, Intel and its partners announced a number of designs.
Intel Corporation (INTC)
Intel updated its Atom processor, Z2760, that supports tablets as thin as 8.5mm and as light as 1.5 pounds. The processor will be a dual-core, 1.8Ghz four-thread SoC. Battery life will support over 3 weeks of connected standby and more than 10 hours of local HD video playback.
Investors should add Intel to their watch list. After peaking at $29 in May 2012, shares closed below $23. At that price, the company pays a dividend of nearly 4%, has little debt, and has a P/E below 10. Intel also lowered its forecast, which contributed to a decline in its shares. With bad news priced in the stock, there is upside over the next few months as Windows 8 rolls out to consumers.
Dell (DELL) does not think Windows 8 will be adopted by businesses in large numbers. That’s the opinion of CFO Brian Gladden. Windows 8 far less bloated than Windows 7 and faster than XP in some cases. As businesses become aware that Windows 8 could run well on older machines, Dell and HP (HPQ) will not benefit as businesses will not need to buy as many new machines.
Below is a chart of Dell and HP illustrating the change in POP over time. Both companies are deeply undervalued:
In the semiconductor space, two companies to watch are Advanced Micro Devices (AMD) and Micron Technology (MU). AMD will continue to have problems competing with Intel, but its low-end processors have good graphics power that would interest budget-conscious consumers. Micron would benefit from an increase in memory demand if Windows 8 sales are strong.
Chart of Micron and AMD
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