Microsoft Corporation (MSFT) is generating a great amount of cash flow and has changed aspects of the company that aren’t reflected in its valuation, and is looking at potential benefits of new chips coming from Intel Corporation (INTC), which may drive consumer activity, says Nathan Snyder, Portfolio Manager at Snow Capital Management.
“We believe [MSFT] has changed in ways that don’t seem to be reflected in the valuation — 75% of their business is not Windows-related. The percentage that is Windows obviously has some issues, but the company has been able to, in some ways, transform itself into a different company than the way people have traditionally viewed it. They are no longer a true growth company but they generate a great amount of cash flow,” Snyder said.
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Snyder expects new chips coming out of Intel to drive a product refresh across the technology market, driving some consumer activity and potentially benefiting companies like Microsoft.
“From a timing standpoint, we believe that the new chips coming out of Intel should drive a product refresh across the technology market. There is no guarantee that this will be the case and we remain open-minded, but we should see relatively quickly whether this holds true or not. It’s been a while since anything outside of an Apple (AAPL) product has created a product refresh cycle. So the extended battery life of the new chips from Intel should drive some consumer activity,” Snyder said.
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