Buy Intel (INTC)

Shares of Intel (INTC) have been hammered on news showing that PC sales to consumers have been soft in the current back to school quarter.

I think that sell off ignores the company’s strengths in other markets, such as servers, that show no signs of slowing growth, and it ignores the huge replacement cycle coming for PCs as businesses and consumers all make the purchases that they put off during the recession.

Timing a product replacement cycle in an economy as tough to read as the current one isn’t easy—but thanks to the drop in Intel’s price the stock comes with a very acceptable 3.4% dividend yield. That means you’ll get paid to wait for the replacement cycle to kick in.

And at a rate that’s well above the current 2.75% yield on 10-year U.S. Treasuries.

A technology stock with great potential for capital appreciation and paying a 3.4% yield?

Those don’t come around very often. Read more

Got lots of cash? How about clubbing your competition with the green stuff? That’s what HP seems determined to do to Dell

On the surface, bidding $2 billion for a company that hasn’t made an operating profit in the last five years looks nuts.

Dig deeper, though, and the battle between Dell (DELL) and Hewlett Packard (HPQ) to buy data storage company 3Par (PAR) doesn’t look nuts. It’s looks insane. Sales are projected to hit all of $235 million for the year that ends in March 2011. Earnings before interest, taxes, depreciation, and amortization (EBITDA) are projected at just $21 million.

On August 28 Hewlett Packard bid $2 billion for 3Par, topping Dell’s previous bid, which topped Hewlett Packard’s previous bid, which topped Dell’s bid. Dell proposed paying $1.5 billion for 3Par. The latest bids come to roughly 95 times EBITDA for 3Par.

Aren’t these companies certifiable?

Well, if you’re even asking that question you don’t understand where we are in the economic cycle and how that’s driving company strategy in the technology sector.

This isn’t an age for valuation when companies carefully figure out how to get the best value for the cash they’re about to spend.

This is the era of Cash as Bludgeon. Cash rich companies are looking to club their poorer competitors over the head with dollars. At worst, the result of this spending will be a competitor unable to climb off the canvas for years. At best, this spending might be able to crush a competitor forever.

Put the Dell/Hewlett Packard contest over 3Par into competitive context and it starts to make sense, in spite of the insane valuation awarded to 3Par. Read more

Update Intel (INTC)

Blow out quarter. Stunning increase in guidance. A totally justified 4.3% gain in the after-hours market on the day it announced earnings.

Now we’ll see if Intel (INTC) can juice the rest of the technology sector. (Look today to see how Microsoft (MSFT) reacts, for example.)

After the market closed on April 13 Intel announced earnings of 43 cents a share. That was 5 cents above Wall Street projections. Earnings for the first quarter of 2009 came to 11 cents a share. Revenue increased by 44% to $10.3 billion. Analysts had projected $9.84 billion. Gross margin climbed to 63.4%. That was above the company’s January forecast of 59% to 63%.

But the good news didn’t stop with the current quarter. Read more

My guide to how to worry: Know what to worry about and when if you don’t want to get spooked out of a rally–or get killed in a correction

(Originally posted on October 14 but several readers have asked me to repost.)

What me worry?

On a day when the Dow Jones Industrial Average closes above 10,000 for the first time in a year and when the Standard & Poor’s 500 stock index closes within kissing distance of 1100 at 1092 ?

Of course.

When the market is rallying and everyone is getting kind of giddy, it’s exactly when you should be worrying. You don’t want to head for the exits just because an index has crossed some arbitrary number. That’s silly. But you would like to know what the chances are that something will go wrong.

How bad it might be if something did go wrong.

And when. Don’t forget the “when.” Deciding to sell because you’re worried that something bad is set to happen in 12 months is a guaranteed way to leave a big chunk of change on the table.

So what are my worries and what timetable are they running on? Read more

Buy Taiwan Semiconductor (TSM)

Sure you want a piece of the technology action. Who wouldn’t after Apple (AAPL) broke to an all-time high after the company announced earnings on October 19. But isn’t everything priced out of reach? After all, we’re not exactly in the early stages of this rally.

I’ve found one late stage tech stock, though, that’s still cheap and that has, in my opinion, lots of potential. Read more