So much has been discussed about PC battles, about who is taking market share from whom and about who is winning the fight. The problem is, the real loser in this battle is the shareholder. The buying customer, of course, is winning as PC prices have been driven down in an effort to capture market share.
Dell Inc. (NASDAQ:DELL) has serious issues in front of it and will need at least three to four quarters to sort it all out. Not just the PC market, but the server market is also under some pressure as International Business Machines Corp. (NYSE:IBM) is a formidable player. Dell returned to its roots by asking Michael Dell to re-assume the CEO role. He has a mess on his hands and will need plenty of time to re-position Dell. I believe this stock is a sell and should be revisited in the $16-17 area.
While Hewlett-Packard Co. (NYSE:HPQ) has gained share against Dell in both the PC market and the server market, it faces its own issues. The printer market is being aggressively pursued by Lexmark and other Japanese competitors. and the server market has an 800 pound gorilla in the form of IBM. Although H-P does not have the structural problems of Dell, I believe the stock, as I wrote yesterday, will be trading sideways or in a narrow range.
Then there is Apple Inc. (NASDAQ:AAPL). Apple has innovation and uniqueness in its product line such as with the iPod and the upcoming iPhone. Apple can therefore protect its pricing models and its margins. This is a winning situation. Apple has growth in both revenues and earnings that will lead the stock well past $120 per share over the next 12 months. So much is discussed about the iPod/iPhone, but there are other dynamic forces at work. Software products and the ever improving Mac computer will also drive strong margin and earnings momentum. CPU market share gains are also impressive.
If you must have exposure to the hardware space, DELL and HPQ are not the stellar investments they once were while AAPL has massive leverage and momentum in place. I think the choice is clear.
Georges Yared is the author of "Stop Losing Money Today" and "Baby Boomer Investing"
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