MARCH MADNESS: Microsoft (MSFT) vs. Intel (INTC)

A college basketball team’s pedigree becomes irrelevant immediately after tip-off. At that point, the only thing that matters is how many points each team can score on the other over the course of the next 40 minutes.

march-madness-250It’s the same for stocks. Companies that may have once been titans can’t always remain champions. Conversely, companies that may have developed a reputation for less-than-thrilling results can often rebuild themselves while nobody’s noticing.

It’s a premise that matters a great deal in the pairing of Microsoft Corporation (NASDAQ:MSFT) against Intel Corporation (NASDAQ:INTC). One of them has been lackluster for years, but is now a surprising contender. The other had been a contender for years, but is now fighting an uphill battle.

Is there any chance either MSFT or INTC could slip back into their old ways, for better or worse?


Don’t look now, but Microsoft matters again, and is doing well. As it turns out, former CEO Steve Ballmer didn’t ruin the company beyond repair. As it also turns out, new CEO Satya Nadella may actually know what he’s doing. The numbers certainly say so. Sales are on pace to grow more than 8% this year. Although net income is projected to slide by single-digits in fiscal 2015 on a per-share as well as an overall basis, both are expected to grow by double-digits next year as the company wades deeper into cloud waters and rekindles its stagnated software business.

Perhaps the most important thing Nadella has done to make Microsoft a shining star rather than a has-been, however, isn’t showing up on the books yet.

Although Ballmer was generally a decent leader, he steered the company into a vision where everyone else was, one way or another, a competitor. It’s a mindset that may have worked in the past, but the line between competition and cooperation is a thin one that may be best crossed in the current environment … in the name of growth.

And Nadella is doing that. He’s actually partnering with long-time, indirect rival Oracle Corporation (NYSE:ORCL) on what’s being described as a multi-tenant, cloud-based database.

Nadella has also crossed other, previously uncrossable lines, including the development of a Windows Office app for the iPad and at least an acknowledgement that some customers are using platforms other than Windows.

As Apollo Education Group Inc (NASDAQ:APOL) CIO Michael Sajor explained of the paradigm shift:

“They were, all-around, just a pretty ugly company to deal with. … (But) if they stay on track, they’ll win our hearts and minds like other companies have done by becoming real partners.”


Intel Corp. (NASDAQ:INTC)Meanwhile, it’s difficult to believe that Intel — at one point the industry standard in processor chips found in most personal as well as business computing devices — could lose its strong hold on that market. The advent of tablets and smartphones as an alternative to PCs was an opening to competitors, who exploited it successfully.

The latest evidence of this seemingly losing battle: INTC lowered its revenue outlook for the current quarter by a billion dollars. The company now expects to report a top line of approximately $12.8 billion, versus prior estimates of $13.7 billion.

That being said, although the company has struggled to remain competitive in a mobile-oriented digital world, Intel may have finally had a much-needed reality check with the man in the mirror.

It’s only a small first step, but even the longest of journeys start with that first step – in early March, Intel unveiled some new technologies that would actually give it a foothold to wade back into deeper mobile waters. Specifically, the company unveiled a new processor specifically designed for lower-end phones and tablets, as well as a new processor for mid-tier tablets. Additionally, the company introduced an LTE-friendly mobile modem that offers download speeds of up to 450 Mbps.

It’s not a game-changing technology for the company. But, it’s an important (and meaningful) technology that not only serves as a growth opportunity, but suggests Intel recognizes it needs to get even better at offering marketable mobile solutions. That’s a good start.

Our First-Round Pick: MSFT

Kudos to Intel for figuring out it needs to change something, but it’s got years of damage to undo while it’s also building new, marketable products for the future. It could be years before the company gets back in a worthy, mobile-driven groove.

Microsoft, on the other hand, is in an upswing rather than in the midst of a downswing. It’s a different culture and mindset than how things have been in the past, but the Nadella plan of exploring all potential growth opportunities is a refreshing one that’s already paying dividends — literally and figuratively.

That’s just one reporter’s opinion, though. Let the voters pick the victors.

Head back to the Stock Market Madness bracket to vote for your favorite stocks and check out other previews!

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.

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