Intel's Profit Slips, but Investors Are Still Turning Toward Tech's Staid Stalwarts

Intel Corp. on Tuesday reported lower earnings that were slightly better than analysts' expectations. The way many people feel about tech stocks after a recent sell-off, that could pass for a rousing victory.

On Tuesday, Intel, the world's largest maker of semiconductors, reported first-quarter earnings of $1.95 billion, or 38 cents a share, down 5 percent from a year ago. Revenue was $12.76 billion, an increase of about 1.5 percent.

The company's stock was little changed before the earnings came out, then rose slightly in after-hours trading. A survey of analysts by Thomson Reuters projected Intel would earn 37 cents a share.

So far this year, Intel shares are up about 3.7 percent, slightly higher in after-hours trading, compared with a fall of 3.4 percent in the tech-heavy Nasdaq stock exchange, while Internet companies like Twitter, Amazon and Netflix are all down by double-digit percentages.

The most dramatic of these declines has been that of Twitter, which so far this year has lost 33 percent of its value. Meanwhile, Microsoft, Oracle and Hewlett-Packard have all gained for the year.

'There has been a rotation of investors into old-school tech shares,' said Doug Freedman, an analyst with RBC Capital Markets. 'The monsters are up, because they aren't dumping money on things that won't create revenue in the foreseeable future.'

Much of the stock market's tech investment is still in shares of the older tech companies not directly associated with the Internet. Apple, which has a market value of $462 billion and is down 6.4 percent so far this year, still has the largest capitalization of any tech company. An exception is Google, ranked second, with a capitalization of nearly $361 billion.

But Google is not so far from Microsoft, which despite years of slow growth remains worth $330 billion. And in the current sell-off of Internet companies, the two are moving closer together. So far this year Google shares have lost about 3.5 percent of their value, while Microsoft has gained 7 percent.

One reason shares in the older companies have done better is that they were slow to react to areas like social media, analysts say, and in many cases they resigned themselves to growing at slower rates and never saw a dramatic share price increase last year.

For some longtime observers of the market, the split in technology shares is a sign of overall health.

'We've had a mini-bubble in Internet companies, where people invest in companies with no discernible fundamentals and trade on the momentum of stocks going up, until they don't,' said William H. Janeway, managing director and senior adviser at Warburg Pincus. 'Investors have substantial money in tech, and a portion of that is in high-risk areas. Now they are going back to tried-and-true companies.'

'It's not all over for tech or a broad-based bubble,' Mr. Janeway added. 'There are areas like mobile, cloud computing and e-commerce that will produce substantial opportunities.'

Inside the big firms, it can be hard to let go of the high-growth dreams. Intel, which for two decades benefited from the global boom in personal computers, missed the shift to smartphones and tablets.

Last week two major research firms reported that worldwide PC sales continued to fall in the first quarter with no sign of letup. Intel, which spent hundreds of millions on projects to revive PCs, has recently cut staff while seeking growth in areas such as cloud computing and wearable devices.

The company would do better to keep cutting, Mr. Freedman said. 'Since the dot-com boom, they were looking for 15 percent growth,' he said. 'They feel like they are at the limit of what they can spend, but it doesn't seem like they've settled down to just growing with the economy.'