Why Tech Missed the Dow's 15,000 Run

Before you go, we thought you'd like these...
Before you go close icon

Stocks set more records today, as the Dow Jones Industrials jumped 87 points to finish above the 15,000 level for the first time. For investors, no news has been good news, as a lack of any problems on the global economic front has given the markets greater stability. Moreover, Europe saw an unexpected boost in industrial-order activity, pointing to potential further gains for international stock markets.

Most stocks in the Dow rose, but the tech triumvirate of Microsoft , Cisco , and Hewlett-Packard were notable for their declines. For Microsoft, which fell 1.3%, two pieces of news reflected the company's shortfalls, as the software giant announced an extension of the revenue-per-search guarantee provisions of its partnership with Yahoo! and said that it would release a major update to its Windows 8 operating system later this year to address some important issues. Microsoft's shares have performed very strongly lately, though, so a minor setback doesn't necessarily reflect the end of the stock's bull run.

Similarly, HP has performed impressively so far in 2013, rising 45% and erasing a substantial part of its huge declines from last year. With a lack of major news today, what's amazing about the stock is that investors have been willing to be patient with its turnaround. Analysts expect revenue to keep falling both this year and in fiscal 2014, with earnings growth tepid at best. But even after its big rise, HP stock doesn't need earnings growth to justify its valuation, and value investors are starting to count on the company's survival even in the face of weak PC demand.


For Cisco, which fell 2%, revenue growth isn't so much the problem as profitability. Earnings increases are expected to remain in the single-digit percentages this year and fall to around 5% in fiscal 2014, signaling skepticism about the company's ability to compete in the highly cutthroat big-tech space. With so many players in the industry trying to encroach on each other's traditional areas of expertise, Cisco finds itself in the tough situation of trying to expand into new areas while having to defend its networking prowess. Optimistic investors reap a valuable dividend yield of more than 3% as well as benefiting from inexpensive earnings multiples, but Cisco will have to deliver on the growth front to maximize its shareholders' profit potential.

The massive wave of mobile computing has done much to unseat the major players in the PC market, including venerable Hewlett-Packard. However, HP's rapidly shifting its strategy under the new leadership of CEO Meg Whitman, making it one of the least-appreciated turnaround stories on the market. The Motley Fool's technology analyst details exactly what investors need to know about HP in our new premium research report. Just click here now to get your copy today.

The article Why Tech Missed the Dow's 15,000 Run originally appeared on Fool.com.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter: @DanCaplinger. The Motley Fool recommends Cisco Systems. The Motley Fool owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story

Want more news like this?

Sign up for Finance Report by AOL and get everything from business news to personal finance tips delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.

From Our Partners