With Friends Like Intel, Microsoft Doesn't Need Enemies


The holidays are coming, and coming fast. And it's not just retailers prepping for the Christmas shopping season -- IT companies are also ramping up in preparation for the consumer spend-fest. The Windows 8 OS from industry-leading Microsoft (NAS: MSFT) is one of the more highly anticipated releases still on the docket this year.

Most early reviews of the new Microsoft OS have been positive. And companies are lined up and ready to utilize the latest and greatest Microsoft release in products ranging from smartphones to PCs. So what's the problem? Paul Otellini, CEO of longtime Microsoft partner Intel (NAS: INTC) , was "overheard" at a private company gathering telling Intel employees that Windows 8 isn't ready, and won't be, even after its release to the general public.

Is anything really private anymore?
Did Otellini learn nothing from presidential candidate Mitt Romney? In this age of mobile computing and instant communications, nothing's private. Which makes one wonder: When Otellini mentioned Microsoft's rush to get Windows 8 into computing devices by the holiday shopping season, did he have an inkling word would spread?

It's impossible to know, of course, but before you stop at the headlines screaming "Windows 8 Not Ready," it's worth noting that Otellini wasn't through with his moment of sharing. The Intel CEO went on to say that releasing Windows 8 now is the right move. Microsoft can work out the itty-bitty bugs after it ships, according to Otellini, and there's certainly precedent for that. Who hasn't downloaded a patch, update, or some variation thereof, after launching a new system or software?

But there's a fine line: A few minor tweaks aren't surprising, and should be expected, but bugs that affect basic functionality, security, or other critical applications of a system can cause long-lasting damage. If you remember Vista, Microsoft's, um, strategic error from about five years ago, you know the difference between a few tweaks on the fly, and a full-blown disaster.

Analysts are not amused
Microsoft watchers are less-than-enamored with the rumors that Windows 8 is hitting the general populace before it's ready, and that shouldn't be surprising. Analysts have been underwhelmed with Microsoft for much of the past year, which is why it remains an outstanding investment opportunity (and that's relative to an entire industry that's undervalued).

An analyst at JMP Securities, after playing around with a Windows 8 beta version, said the firm is "concerned with the level of bugs and fine tuning that appears necessary." Other analysts have gone on record voicing similar concerns, too.

So, what's the rush?
The timing's important for a couple of reasons. Number one, the aforementioned holiday shopping season is quickly approaching which, from Microsoft's perspective, is reason enough. Number two, and just as important for Microsoft, is to keep up with its friends over at Apple (NAS: AAPL) . The buzz -- good and bad -- surrounding Apple's iPhone 5 release can still be heard, regardless of which side of the iFence you're on.

Otellini's latest comments left little doubt -- Microsoft is walking a fine line, at least for near-term investors. And there are others who have a lot to lose if Windows 8 woefully underperforms when it hits the general market in late October.

By most accounts, my own included, Nokia (NYS: NOK) is hanging by a Lumia-like thread. The projected introduction date of Nokia's Lumia 920 is the first couple of days in November, also in the early stages of the all-important holiday rush. Can you imagine if the Windows 8 OS running Lumia is riddled with problems? Not a pleasant thought for Nokia CEO Stephen Elop, who likely has his job indelibly tied to the success of Lumia.

Windows 8 is the talk of the IT town, as it should be; it's a big deal. But, regardless of the manner and number of tweaks the new OS will need, for the mid- to long-term investor, Microsoft remains a bargain. In addition to its trailing P/E of 15.12, which is comparable with, if not better than, most anyone in Microsoft's sector, its valuation based on a forward earnings multiple of just over 9 is ridiculously low.

Microsoft's concerted effort to lead the way in the exploding cloud computing market is often overlooked. And the numerous possibilities of Windows 8, bugs or no bugs, along with a dividend yield of 3%, should have Microsoft on your short list of growth and income value opportunities.

Just how true a friend Intel is may be in question, but no one doubts the value that the stock presents for investors. The recently announced downward guidance for the coming quarter has left Intel in much the same position as Microsoft: A solid industry leader offering great value. To learn more, including the risks and upside potential of Intel, review the Fool'sspecial premium reporton the chip leader.Click hereto get started.

The article With Friends Like Intel, Microsoft Doesn't Need Enemies originally appeared on Fool.com.

Fool contributorTim Bruggercurrently holds no securities positions mentioned in this article. The Motley Fool owns shares of Microsoft, Intel, and Apple.Motley Fool newsletter serviceshave recommended buying shares of Microsoft, Intel, and Apple.Motley Fool newsletter serviceshave also recommended creating a synthetic covered call position in Microsoft and a bull call spread position in Apple. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.

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