"The Co-Op of Three," which includes Intel Corporation (NASDAQ: INTC), Apple, Inc. (NASDAQ: AAPL), and Microsoft Corporation (NASDAQ: MSFT) seem to be surviving the economic downturn. According to Businesswire:

Intel Corporation today announced record first-quarter revenue of $9.7 billion, operating income of $2.1 billion, net income of $1.4 billion and earnings per share (EPS) of 25 cents.

The earnings helped to propel the stock higher in after hours trading to the point where Intel is flirting with an almost 8% gain since the close of the regular session. The street was happy not to hear another piece of horrifying news and took notice of how well that Intel held up during this difficult economic environment. Even better, margins were up 4% YOY to a whopping 57% for the full 2008 fiscal reporting period. Much of this has to be a result of the key relationship that Intel has with Apple.

Probably one of the greatest technology deals of recent time has got to be the co-op of Apple/Intel/Microsoft. Finally thinking abut the bigger opportunity, these three giants approached the competitive landscape with a resolve to dominate. Since the day Apple's operating system allowed the running of Microsoft's Windows OS, there was no stopping the expansion. Intel's part in all of this was also key. By producing a chip that would help bring these two behemoths together, it has been rising a nice wave of income. No longer does Intel have the same competition as it did only a few years ago.


Since Advanced Micro Devices has been virtually shut-out of the deal, its stock has plummeted. Interestingly, there was actually a point just before the "Co-Op-of-Three" that AMD looked to dominate the market with their latest dual-core processor. That was short lived. April 5, 2006 was the day that Apple announced a new dual-boot system that would run Windows XP service pack 2 in addition to its OS-X. Take a look at the diversion of AMD and INTC since then. Now, there may be something to this after all! The Apple deal has clearly been a winner for all of the players. While Apple has been the clear winner as it has been able to pick up an amazing amount of market-share, it has helped to keep the others out of too much trouble.
Now the important question to be answered: What does this mean? As I explain in chapter 4 of my book, The Disciplined Investor, investors must take the time to understand the key fundamental points of a company before they jump in or out.

From the Intel press release, the first point that needs to be addressed is the impact of the weak dollar on overall sales. While Intel has production facilities all over the world, they still benefit from the weak dollar as can be seen by the dominance in their geographic revenue breakdown. Only 21% of the revenue comes from the Americas.

Second point is the $2.5 billion stock buyback program that was just announced. Most believe that this is a sign that a company has a strong belief in their stock as the best place to invest. I don't. There is not consistent evidence that proves that management has the ability to pick their company over others as a better investment. In fact, I would go so far as to say that they may be too close to actually have an objective opinion. From the recent rash of buyback programs announced, it seem more likely that these are set in motion to help keep the stock artificially high during market downturns. Eventually all of these will run out of juice. A few key points from the news release:
Business Outlook: Intel's Business Outlook does not include the potential impact of any mergers, acquisitions, divestitures or other business combinations that may be completed after April 14.

Q2 2008:

• Revenue: Between $9.0 billion and $9.6 billion. The forecast reflects a significant reduction in NOR flash memory revenue as a result of the Numonyx transaction.
• Gross margin: 56 percent plus or minus a couple of points.
• Spending (R&D plus MG&A): Between $2.8 billion and $2.9 billion.
• Restructuring and asset impairment charges: Approximately $250 million.
• Net gains from equity investments and interest and other: Approximately $75 million.
• Tax rate: Approximately 33 percent.
• Depreciation: Approximately $1.1 billion.

Full-Year 2008:

• Gross margin: 57 percent plus or minus a few points, unchanged.
• R&D: Approximately $6 billion, higher than the previous expectation of approximately $5.9 billion.
• MG&A: Approximately $5.5 billion, unchanged.
• Capital spending: $5.2 billion plus or minus $200 million, unchanged.
• Tax rate: The tax rate for the third and fourth quarters is expected to be approximately 33 percent.
• Depreciation: $4.4 billion plus or minus $100 million, unchanged..

So, all that to say this: Intel, Apple and Microsoft, while not exempt from the prevailing market conditions, are in good shape. Each could be considered a BUY from this vantage point. Do not confuse the problems within the financial sector with anything to do with these three well run companies.

Andrew Horowitz is a Money manager and author of the bestseller - The Disciplined Investor - Essential Strategies for Success. His featured and iTunes top10 podcast can be downloaded at no charge from: The Disciplined Investor Podcast or Subscribe in iTunes