Intel, Microsoft Ride Again

Tortoise and the hare
Don Farrall | Digital Vision | Getty Images

Call it the return of Wintel.

Hallelujah! That old amalgamation of Windows and Intel that ruled the market in the '90s is back to work.

Never mind that the rise from the rubble of old, uncool tech isn't being fueled by the PC partnership they once were. All that matters is that their stocks have been outperforming the broader S&P 500 and Nasdaq 100 over the past one, three and six month periods.

The best part: They're so old, slow, plodding and uncool they've become trendy.

Somewhere someone must be thinking that this is a sure sign we're witnessing the last hurrah of this leg of what appears to be an unstoppable bull market.

Maybe it is, but the bigger point is that each company is rising on its own merits: Microsoft on slightly improved results, but more importantly -- indications the company is getting serious about bowing to shareholder pressure to reshuffle the executive decks and, perhaps, the entire corporation; Intel on new chips for mobile, with its notable win as chip supplier for Samsung's Galaxy Tab 3.

On top of that, because they're big, liquid and easy to trade, they get juiced further as the unlikeliest of short-squeezes. That's right: As as their shares have crept higher, they've climbed to the top of the listing of the most heavily shorted stocks on on the Nasdaq as hedge funds piled into what would appear to have been safe shorts.

But there's something else that has been ignored: Unlike so many tech companies, including Facebook, Salesforce and Amazon, what you see with their results is what you get. As Andrew Bary reported in Barron's over the weekend, Microsoft and Intel are among a small number (including Apple) that report results on a GAAP basis. No smoke-and-mirrors of trying to pretend stock-based compensation (a.k.a. options) are not routine expenses associated with doing business.

The GAAP vs. non-GAAP tug-of-war has been a recurring and largely ignored argument for years, but it's an important one that often gets buried in the momentum of the stocks and their stories.

Bernsten Research's Toni Saccanaghi reignited the issue last month in a report that audaciously asked, "How much free cash flow is really free?"

It's an excellent question. Trouble is, in Silicon Valley, nobody talks free cash flow.

It is and always has been about the product, the story and then, if and when all else fails, the quality of the numbers.

For many these companies operating expenses are growing faster than revenue. The options. The daycare. The massages. They all get lumped in somewhere on the income statement as a buried but big cost. Investors look the other way as long as the stocks are performing like a hare.

In wacky markets like these, however —when the irrational mantra is to invest in stocks for the sole reason than there is no other place else to put your money—it's hard not to root for the tortoise.

Go get 'em, Wintel.

—By CNBC's Herb Greenberg. Follow him on Twitter:@herbgreenberg and Google

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