Are you PC? By that, I don’t mean are you in favour  of the non- denominational Winterval decorations that probably already adorn your local council offices. I mean: are you PC? Or Apple Mac?

This is a more fundamental question – of very real importance to two large US corporations and, I would argue, to income investors the world over.

Apple is the author (or should that be “verb conjugator”?) of the iPod, iPhone and iMac. Microsoft is the foister of Windows software on every crash-prone PC you’ve ever been forced to use. As the twin giants of Silicon Valley, they have been engaged in battles – over market share, intellectual property rights and profits – for years.

A decade ago, no self-respecting IT guy was without a T-shirt declaring “Windows ’95, Macintosh ’84”, in ironic reference to Microsoft’s belated attempt to emulate Apple’s pioneering graphical user interface. Three years ago, a T-shirt-wearing Robert Webb and his grey-suited comedy foil David Mitchell fronted Apple adverts in which “I’m a Mac” Webb created fun pictures, movies and websites, while “I’m a PC” Mitchell produced dull timesheets, spreadsheets and pie charts. Microsoft retaliated with its own adverts featuring toddlers and astrophysicists as self-confessed “PCs”.

It became sectarian. It divided families. You knew which side you were on (I once accused my Gates-ite Windows-ist wife of being unfit to touch the screen of an iPhone . . . tellingly, she bought one anyway).

Now, though, the war appears over – a winner has emerged.

Last week, Apple reported a 47 per cent rise in quarterly profits to a record $1.67bn, on the back of surging revenues. iPhone sales were up 7 per cent in the three months to September and Mac sales were up 17 per cent. Now, Apple is is launching the iPhone in China and allying with additional carriers elsewhere. It is also expected to announce new Mac computer models in the next few weeks.

Yesterday, Microsoft announced an 18 per cent fall in quarterly earnings, to $3.57bn. Any hopes of a pick-up are now pinned on its new Windows 7 operating system for PCs, which is intended to replace the slow, baffling and poorly-selling Vista. With operating system sales accounting for 42 per cent of Microsoft’s earnings, Windows 7 has to succeed. It may do by default – because so many users of Windows XP have refused to upgrade to Vista. But with upgrades from XP to 7 requiring the reinstallation of every program on a PC, Which? Computing has advised PC users to wait a year before buying.

So, Apple should become more cash-flow generative, see its R&D spend reduce as a percentage of sales and start to look more like a big-brand income stock. But it won’t. It is still sitting on a cash pile of more than $25bn and paying no dividend.

For this reason, I was intrigued to encounter the “iPhone killer” this week. It was not an embittered Microsoft employee, nor the lawyer bringing Nokia’s patent claim against Apple, nor a besuited David Mitchell. It was the HTC smartphone wielded by Henderson Far East Income fund manager Mike Kerley.

HTC is the Taiwanese maker of the first touch-screen phone powered by Google’s “Android” software. To be honest, it’s not much to look at. Nor is it unique. But it is small, fast – and fully developed. As a result, HTC’s capital expenditure is now lower, its manufacturing is outsourced and its sales are generating lots of cash. More importantly to income investor Kerley: “HTC is free cash flow positive, cash is 25 per cent of its market capitalisation, and it offers a 6 per cent yield.”

It’s not the only eastern example. Kerley also cites the Taiwan Semiconductor Manufacturing Company. “It epitomises the change in Asia,” he says. “TSMC used to be all about capital expenditure, but it gained market share, it now has pricing power, so its yield has risen.”

In Asia, tech stocks are becoming income stocks. But so are other companies that are cash-rich and debt-
poor. “They might be very capital intensive businesses but once they get to certain point, their market share continues to grow and ultimately they get pricing power – look at Samsung.”

Kerley’s ideal income holdings are “companies at the end of that growth phase, that go cash flow negative to positive and start paying a dividend.” In his fund, these can be Chinese property, construction and capital goods companies, Asian telcos and Korean and Taiwanese technology groups paying 5-7 per cent dividend yields.

What differentiates this strategy from that of UK and US income funds is yield diversification. “Ask where the risk is: in a portfolio of income stocks in the UK or a diversified Asia equity income fund?” Kerley says. A yield of 6.2 per cent on Henderson Far East Income has helped to answer this question. This has since fallen to 4.3 per cent, but only because price rises have pushed total shareholder returns to 44.5 per cent this year.

Try inputting that to your Microsoft Office Excel for Windows Vista spreadsheet – if you have the patience.

matthew.vincent@ft.com