For now, in technology stocks, it is nice to be a little old-fashioned.
Shares in prominent companies like Amazon, Netflix and Twitter have endured significant sell-offs so far this year, leading to talk of problems in the technology industry. The most stark of these declines has been that of Twitter, which so far this year has lost 33 percent of its value.
But while tech's Internet darlings have stumbled, a number of older tech giants, like Hewlett-Packard, Microsoft and Oracle, have so far this year outperformed market averages.
Upon occasion, it seems, it is helpful to be late to the party. The older tech companies may have missed out on the growth in areas like social media, analysts say, and in many cases, they have resigned themselves to slower growth than in their own rah-rah days. But when the hot new thing cools down, that "good enough" approach is good enough for many investors, too.
"We've had a minibubble in Internet companies, where people invest in companies with no discernible fundamentals and trade on the momentum of stocks going up, until they don't," said William H. Janeway, managing director and senior adviser at Warburg Pincus. "Investors have substantial money in tech, and a portion of that is in high-risk areas. Now they are going back to tried-and-true companies."
On Tuesday, Intel added to the better-than-expected news of tech's old guard. The company, the world's largest maker of semiconductors, reported first-quarter earnings of $1.95 billion, or 38 cents a share, down 5 percent from a year ago. Revenue was $12.76 billion, an increase of about 1.5 percent.
The company's stock was little changed before the earnings came out, then rose slightly in after-hours trading. A survey of analysts by Thomson Reuters had projected that Intel would earn 37 cents a share.
So far this year, Intel shares are up about 3.1 percent (slightly higher in after-hours trading) compared with a fall of 3.4 percent in the tech-heavy Nasdaq stock exchange.
"There has been a rotation of investors into old-school tech shares," said Doug Freedman, an analyst at RBC Capital Markets. "The monsters are up, because they aren't dumping money on things that won't create revenue in the foreseeable future."
Much of the stock market's tech investment is still in shares of the older tech companies that are not directly associated with the Internet. Apple, which has a market value of $462 billion and is down 6.4 percent so far this year, still has the largest capitalization of any tech company. An exception is Google, ranked second, with a capitalization of nearly $361 billion.
But Google is not so far from Microsoft, which despite years of slow growth remains wort! h $330 billion. And in the current sell-off of Internet companies, the ! two are moving closer together. So far this year, Google shares have lost about 3.5 percent of their value, while Microsoft has gained 7 percent.
One reason that shares in the older companies have done better is that they were slow to react to areas like social media, analysts say. In many cases, they accepted that they would grow at slower rates and never saw a sharp increase in share price last year.
For some longtime observers of the market, the split in technology shares is a sign of overall health and that investors are a little more discriminating than critics would believe.
"It's not all over for tech or a broad-based bubble," M! r. Janeway added. "There are areas like mobile, cloud computing and e-commerce that will produce substantial opportunities."
Inside the big companies, it can be hard to let go of the high-growth dreams. Intel, which for two decades benefited from the global boom in personal computers, missed the shift to smartphones and tablets.
Last week, two major research firms reported that worldwide PC sales continued to fall in the first quarter with no sign of letting up. Intel, which spent hundreds of millions on projects to revive PCs, has recently cut staff while seeking growth in areas like cloud computing and wearable devices.
Intel has even created a new division to focus on the so-called! "Internet of Things," the growing industrial use of sensors, communication chips and analysis of data stored in vast "clouds" of server computers. Intel's leadership also talked with analysts on Tuesday about new inroads into the tablet business, and increasing sales of chips for computer servers. The overall message was diversification of revenue.
"When you get to be greater than $50 billion in revenue, it's hard to grow 10 percent," Stacy J. Smith, Intel's chief financial officer, said in an interview. "We look at a lot of markets where we can get a half-billion dollars of growth." In particular, he said, Intel is counting on markets, like the Internet of things, that call for large, complex systems of chips and software.
The c! ompany would do better to keep cutting, Mr. Freedman said. "Since the dot-com boom, they were looking for 15 percent growth," he said. "They feel like they are at the limit of what they can spend, but it doesn't seem like they've settled down to just growing with the economy."
Source : http://www.nytimes.com/2014/04/16/technology/intel-quarterly-earnings-tech-stocks.html?hpw%26rref%3Dtechnology
