The Buzz
HP, Cisco and other tech dinosaurs roar
June 18, 2013: 1:01 PM ET
Not extinct yet! Even though some think old tech companies are boring, investors love HP, Cisco, Intel and Microsoft.
The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, Abbott Laboratories and AbbVie, La Monica does not own positions in any individual stocks.
This column is not about what the Federal Reserve is going to do next or the future of Fed chair Ben Bernanke. Capisce?
Investors have blinders (not referring to former Fed vice chair Alan) on right now. There are a lot of interesting things going on in the market that have little to do with the Fed.
Look for example at how well Hewlett-Packard (HPQ) and other "old" (mature to be polite) tech stocks have done lately.
HP has soared nearly 80% this year as investors bet that CEO Meg Whitman will turn the lumbering tech giant around.
It isn't the only tech dinosaur with ties to the moribund PC business that's thriving either.
Chipmaker Intel (INTC) is up almost 25%. Microsoft (MSFT) has surged more than 30%.
And Cisco Systems (CSCO), a company that still generates nearly half of its sales from the pedestrian world of routers and switches, is up more than 25% in 2013. The stock hit its highest level in over three years Monday.
To ask the question made famous by Marvin Gaye (and less so by 4 Non Blondes): What's going on?
The simple answer is that these four companies are all not just as old as dirt (for tech companies at least), they are cheap as it too.
Related: Cisco plans to double the speed of the Internet
Despite HP's big rally this year, the stock is still valued at less than 7 times fiscal 2014 earnings estimates. Microsoft, Intel and Cisco are all trading in a range of 11 to 13 times profit forecasts for 2014.
All four pay decent dividends as well. Even though bond rates have started to creep higher on all that tapering talk, the 10-year Treasury yield is still a relatively low 2.2%. These four techs top that. HP yields 2.3%. Microsoft and Cisco yield around 2.8%. And Intel's yield is 3.6%.
Yes, none of these four companies are the most scintillating of growth stocks anymore. Heck, HP's sales are expected to fall in fiscal 2013 and again in 2014.
Related: Microsoft gives Ballmer a reason to dance again
But they are stable. They have gobs of cash ("caysh" if you're Cisco CEO John Chambers): $152 billion between the four of them. It's no secret that they face big challenges ahead. And it appears that they all have management teams in place that realize they have to diversify further to avoid getting left in the stock market's version of the dust bin.
Sunil Reddy, a portfolio manager with Apex Capital Management in Dayton, Ohio, said that many of the more mature tech firms have been given a new life due to the advent of cloud computing and the mobile revolution. Investors now realize that the tech giants are not going away anytime soon.
"Investors were worried about obsolescence because of the declining PC environment. But some of these companies were probably punished too much," Reddy said. His firm owns stakes in Cisco and Microsoft.
Related: Intel could make $200 touchscreen PCs a reality
So maybe Apple (AAPL) will join the tech dinosaur club soon? It seems like it's now undergoing the painful transformation from sexy momentum stud to boring value stock that HP, Microsoft, Intel and Cisco have already endured. Analysts have been slashing their earnings estimates on concerns that Apple does not have another disruptive, category-creating product like the iPhone or iPad in its pipeline.
It's possible that Apple investors might eventually reach a point where they are comfortable with the fact that it's likely to be a slow-growth tech stock. After all, Apple has more cash than the older techs and now pays a dividend as well. And the stock trades for less than 10 times fiscal 2014 earnings estimates.
"The overly negative sentiment that has plagued Apple for the past few months seems to be waning. The challenge will be for Apple to innovate further. But we like the stock at this price and the dividend doesn't hurt," said Oliver Pursche, co-manager of the GMG Defensive Beta Fund, which owns Intel, Microsoft and Cisco as well as Apple.
Yes, it may take some time before the transition for Apple is complete. But the recent performance of HP, Intel, Microsoft and Cisco may offer some consolation for Apple investors.
There is life for old tech stocks once the glory days have, in true Springsteen fashion, passed them by.
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Cisco soars but doesn't lift whole market
Cisco's CEO John Chambers no longer dictates the moves in the broader stock market. Or even just the Nasdaq. Stocks were relatively flat Thursday.
But he still must be smiling. Cisco's (CSCO) stock rallied more than 10% following a blowout quarter.
Chambers told investors that he's encouraged by the "good signs" he sees in the economies of the United States and the rest of the world. Several traders on StockTwits shared MORE
Maureen Farrell - May 16, 2013 12:10 PM ET -
Apple's tax dodge
Instead of using its own cash hoard to reward shareholders, Apple plans to go into debt for the first time ever.
Apple CEO Tim Cook said late Tuesday that the company will double the amount it returns to shareholders through share buybacks and dividends by 2015, but will "access the debt market" to pay for it.
Borrowing money seems odd for a company like Apple (AAPL), which has $144 billion in cash. But more than MORE
Hibah Yousuf - Apr 24, 2013 2:47 PM ETPosted in: Apple, bonds, Cisco, debt, dividend, einhorn, Google, interest rates, investors, Microsoft, share buyback, stock buyback, tax, yields -
Microsoft and other tech dinosaurs rally
Dinosaurs are extinct. But dinosaur tech stocks? They're thriving lately.
Microsoft (MSFT) was up 2% Wednesday and shares passed $30 for the first time since October. That move comes after a nearly 4% rise on Tuesday. Intel (INTC), the chip yin to Microsoft's operating system yang in the Wintel PC market, rose 3% Wednesday. It was up 3% Tuesday too. And Cisco Systems (CSCO) followed up a 2% pop on Tuesday MORE
Paul R. La Monica - Apr 10, 2013 12:23 PM ET -
Investors switch off Cisco
Anyone can reinvent themselves as the saying goes. While Cisco has been doing just that, some think it's gotten a little too ambitious.
FBR Capital Markets analyst Scott Thompson downgraded the stock Thursday to underperform and slashed his price target to $17 from $22.
"We expect it may take longer than management expects to create organic software growth that is able to offset declining core routing and switching revenues," said Thompson in his MORE
Catherine Tymkiw - Mar 21, 2013 1:49 PM ET -
Apple isn't only company with too much cash
The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, Abbott Laboratories and AbbVie, La Monica does not own positions in any individual stocks.
Issuing preferred shares that pay a big dividend may not be the best use of Apple's more than $137 billion of cash and liquid investments. But hedge fund manager and Apple shareholder David Einhorn, who MORE
Paul R. La Monica - Feb 12, 2013 12:01 PM ET -
Special dividends: Big waste of cash for tech
The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, and Abbott Laboratories, La Monica does not own positions in any individual stocks.
Apple (AAPL) has more than $120 billion in cash. Microsoft (MSFT) is sitting on $66.6 billion. And Cisco Systems (CSCO) has $45 billion in "caysh." So will any of these firms join the latest craze that's MORE
Paul R. La Monica - Dec 4, 2012 1:25 PM ET -
Apple and Cisco show investors the money
The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, and Abbott Laboratories, La Monica does not own positions in any individual stocks.
Who needs to own a boring U.S. Treasury bond when you can buy an exciting tech stock and get a similar -- or in many cases, higher -- yield in the process?
Cisco Systems (CSCO) announced Wednesday MORE
Paul R. La Monica - Aug 16, 2012 1:14 PM ET
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