Wintel Partners Microsoft, Intel See "Post-PC' Era Fates Diverge Chipmaker Founders.(A)

Byline: JED GRAHAM

As goes Intel, so goes Microsoft, and vice versa. That's been conventional wisdom since the two companies combined to put the Wintel stranglehold on the PC industry.

But it's no longer true. That's never been more clear than since Intel warned on June 6 that its second-quarter revenue could sink to a nearly four-year low. Intel's shares have plunged about 35% since then. But Microsoft's are up about 7%, partly on speculation it will beat estimates for the June quarter.

"Both companies were extraordinarily great profit and growth machines in the PC era," said SoundView Technology Group analyst Arnie Berman. "But Microsoft has the better shot of being a growth machine in the post-PC era."

The fortunes of the two Titans began to diverge as early as 1998, when the economics of its industry began to catch up with Intel.

A look at the cash holdings of each company tells the story. At the end of 1997, both had about $10 billion in cash. As of March, Intel had $10.8 billion, while Microsoft's hoard had ballooned to $38.7 billion.

The difference is the capital-intensive nature of making chips. Compare Intel's $18.3 billion in property, plants and equipment with Microsoft's $2.2 billion.