intel

MICROSOFT CORP. $27 (Nasdaq symbol MSFT; WSSF Rating: Above average) is the world’s largest software company. Its main products are the Windows operating system, which runs roughly 80% of the world’s computers, and the Office suite of business programs. In the past few years, Microsoft has tried to cut its reliance on software, particularly in the face of free alternatives such as the Linux operating system. In 2001, it launched the first Xbox video game player. Last year, Microsoft started selling an upgraded version called Xbox 360. Despite strong demand for the new machine, Microsoft is still losing money on each unit. However, the company feels that licensing fees from game makers and revenues from online game players will eventually offset the Xbox’s development and manufacturing costs. The company also hopes to sell Xbox owners other entertainment services, such as music and video downloads....

Our recommendations in software stocks have delivered huge gains in the past few years. But many now face growing competition from free software on the Internet, or they trade at high p/e’s. Computer makers are also demanding lower prices for pre-installed programs to keep the costs of new computers down. We still hold a high opinion of these top software makers, but we advise against new buying right now. AUTODESK INC. $38 (Nasdaq symbol ADSK; WSSF Rating: Average) makes AutoCAD, the world’s top selling computer aided design program. About 4 million architects and engineers in over 100 countries use it to design and test new buildings and products. This business supplies nearly 90% of its revenue. The remainder comes from programs that filmmakers use to create special effects....

ADVANCED MICRO DEVICES INC. $41 (New York symbol AMD; WSSF Rating: Extra risk) is the world’s second-largest maker of computer processor chips after Intel Corp. The company also makes flash memory chips through Spansion Inc., a joint venture with Japan’s Fujitsu Ltd. Flash chips retain data in mobile phones and other devices, even when a user turns off the power. However, overcapacity in the flash memory industry has hurt Spansion’s earnings in the past few years. That’s why AMD and Fujitsu sold Spansion shares to the public in December 2005. The sale cut AMD’s stake in Spansion, from 60% to 37.9%. AMD may hand out its remaining Spansion shares to its own stockholders in the next year or two. The Spansion sale generated a one-time charge of $110 million. If you exclude all unusual items, AMD earned $0.45 a share (total $205 million) in the fourth quarter of 2005. It lost $0.08 a share ($30 million) a year earlier. Revenue rose 38.5%, to $1.8 billion from $1.3 billion....

INTEL CORP. $20 (Nasdaq symbol INTC; WSSF Rating: Above average) is the world’s largest supplier of computer chips, with roughly 80% of the market. That figure could rise in the next few months, as Apple Computer begins using Intel chips to power its new line of Macintosh computers. Intel’s profit in the three months ended December 31, 2005 rose 21.2%, to $0.40 a share (total $2.4 billion) from $0.33 a share ($2.1 billion) a year earlier. Sales grew 6.3%, to $10.2 billion from $9.6 billion. However, these figures fell short of earlier forecasts, mainly due to weaker demand for new computers over the Christmas shopping season. Shortages of certain parts also hindered Intel’s ability to keep up with demand, which let rival AMD improve its market share. The news cut Intel’s stock by 10%, and it now trades at 15.9 times its forecast 2006 profit of $1.26 a share. We feel that these are short-term setbacks, and that Intel will bounce back. The $0.40 dividend yields 2.0%....

APPLE COMPUTER INC. $74 (Nasdaq symbol AAPL; WSSF Rating: Extra risk) has risen eight-fold for us since we first recommended it at $9.50 in November 2000. Much of this rise is due to the huge success of its iPod digital music players. The company sold 14 million iPods in its first fiscal quarter ended December 31, 2005, up from 4.6 million a year earlier. That helped lift Apple’s revenue by 65.7% in the quarter, to $5.8 billion from $3.5 billion. Per-share income rose 85.7%, to $0.65 from $0.35. Many iPod buyers are also switching to Apple’s Macintosh computers, whose sales grew 20% in the quarter. Computer sales could slow down in the next few months as buyers wait for faster models that use chips made by Intel. Buyers may also hold off until they can get software that takes full advantage of these new chips....

FIDELITY FOCUS TECHNOLOGY FUND $9.19 (CWA Rating: Aggressive) (Fidelity Investments Canada, 483 Bay St., Suite 200, Toronto, Ont. M5G 2N7. 1-800-263-407 7; Web site: www.fidelity.ca. Load fund — available from brokers) invests mainly in technology companies. This includes computer services, computer software, computer systems, communications systems, electronics, office equipment, scientific instruments and semiconductors (computer chips). The fund expanded in June, 2003 from primarily a U.S. focus to a global scope in its stock selections. Right now, it sees the most attractive opportunities for technology investing in the U.S., Japanese and South Korean markets. The fund looks for stocks with strong earnings growth that appear undervalued....

Here are three Fidelity funds that hold much of their portfolios in one specific sector. We generally advise against investing in funds that concentrate in one economic sector. For example, a fund concentrating in financial services is particularly vulnerable to any setbacks in the sector or interest-rate rises. However, all of these Fidelity funds stick with high-quality stocks. If you do invest in these funds, be sure to adjust the rest of your portfolio so these funds won’t overly concentrate your holdings in any one sector. FIDELITY FOCUS CONSUMER INDUSTRIES FUND $15.82 (CWA Rating: Aggressive) (Fidelity Investments Canada, 483 Bay St., Suite 200, Toronto, Ont. M5G 2N7. 1-800-263-4077; Web site: www.fidelity.ca. Load fund — available from brokers) invests mainly in U.S. consumer goods and services companies....

BANK OF AMERICA $47 (New York symbol BAC) aims to complete its acquisition of MBNA CORP. $27 (New York symbol KRB) in January 2006. The merger seems certain to go through, so MBNA stockholders should tender their shares to avoid paying brokerage fees. Bank of America is a buy. THE BOEING CO. $71 (New York symbol BA) has raised its quarterly dividend 20%, from $0.25 a share to $0.30. The new annual rate of $1.20 yields 1.7%. But high fuel costs could slow demand for new planes. Hold. GENERAL MILLS, INC. $50 (New York symbol GIS) raised its quarterly dividend 3.0%, from $0.33 a share to $0.34. The new annual rate of $1.36 yields 2.7%. Earnings should grow 6% in the current fiscal year, despite rising marketing and other costs. Buy....