Intel Strength Shocks Wall Street; Which Other Tech Winners Are Being Ignored? (INTC, CTXS, VMW, EMC, AAPL, HPQ, DELL, FNSR, NETL, DRWI, GOOG, ARMH, MIPS)
With businesses entering a significant equipment upgrade cycle, and volumes for laptop computers, tablets and smartphones ramping, some leading computing platform providers and other companies supplying key components and technology to the computing markets are poised for growth.
While 43 analysts, IDC and even Gartner got the Intel (INTC) story wrong, Paul McWilliams, editor of Next Inning Technology research nailed it again. Not only did his forecast for $12.85 billion in Q2 revenue match Intel’s guidance exactly, he even hit on all the key points that drove Intel’s success in his extensive State of Tech coverage. Maybe it’s time to see what he has to say about the rest of the industry.
Intel’s biggest edge today is in the data center where it has designed its microprocessors specifically to leverage the virtualization trend. This, of course, goes hand in hand with Citrix Systems’ (CTXS) success, where we should also expect to see upside. But McWilliams, whose model portfolio has posted a gain of 343% since it was started in 2002, says investors interested in VMware (VMW) should consider buying its majority owner, EMC (EMC) Instead.
While the leading players in the computing markets all face specific challenges, demand trends favor gains in the second half of 2011 for companies like Apple (AAPL), Hewlett-Packard (HPQ), and Dell (DELL).
Recent surveys of Chief Information Officers (CIOs) show an intention to boost spending this year. This trend is more likely to accelerate in the second half than stall. This will, of course, be good news for Intel as well as other companies like Dell and Hewlett-Packard that focus on data center applications.
Investors should also look beyond the obvious to find the best investments. For example, data centers need fast connections and there you will find companies like Finisar (FNSR) for fiber optics and chip venders like NetLogic Microsystems (NETL).
What’s driving all this data center expansion is really the convergence of several events. First, meaningful broadband connections are now available at reasonable prices. For data centers to work, fast connections are required. One little known company enabling fast mobile broadband is DragonWave (DRWI).
Also driving data center expansion are enticing new mobile computing devices like the Apple iPad and the various tablets powered by the Google (GOOG) Android operating system. The obvious link between all these is the ARM Holdings (ARMH)-core processor. However, while ARM will continue to rule this market, both Intel and a tiny company called MIPS Technologies (MIPS) are moving in fast. You can’t make money by investing only in the obvious.
The State of Technology report for personal computers (PCs) is one in a series of reports written by Paul McWilliams each quarter in connection with earnings season offering specific guidance on which stocks he thinks investors should own and which should be avoided. These reports are available free, with no strings attached, to Next Inning trial members.
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