Investors are expecting strong quarterly results from major U.S. technology companies over the next few weeks, but a stronger dollar and elevated expectations could mute any effects on stocks.
Tech spending is beginning to creep back, and companies and analysts alike are predicting a new cycle of serious hardware and software buying for the second half of this year.
The question is whether better-than-expected results and bullish forecasts will be enough to move stocks that have already outperformed the broader market recovery, or if a new level of confidence will emerge.
People are still underestimating the amount that the refresh cycle is going to affect tech companies, Kim Caughey, a senior analyst at Fort Pitt Capital Group said, referring to corporate spending on new technology. PCs are going to surprise to the upside this year, probably driven by business.
Executives in charge of IT purchasing at corporations are now expecting more than 2 percent growth, on average, in tech spending this year over last, according to a recent Barclays Capital survey. Six months ago, they were expecting 1.6 percent growth, and a year ago they expected a decline.
The consumer is coming alive too, as employment figures show signs of improving. The computer department has been the busiest area of the store for months, according to one retail survey by a Wall Street analyst.
Worldwide PC spending is now projected to rise 12 percent to $245 billion in 2010, according to tech research firm Gartner. That is much more optimistic than Gartner's previous forecast in December, which called for an increase of only 2 percent.
INTEL LEADS THE WAY
There's no question Intel beats and raises its original guidance, said Wedbush Morgan analyst Patrick Wang.
Signs of strong demand at Intel -- whose chips power three-quarters of the world's PCs -- means the industry is starting to ramp up again, said Caughey at Fort Pitt.
The PC builders have to order from Intel before manufacturing, she said. I'm always looking for those forward indicators, and Intel fits that bill pretty well.
More PCs are good news for Microsoft Corp
But Wall Street is expecting higher profit and sales for the company, helped by the continuing popularity of its Windows 7 operating system.
Each of the sector's big players may be at risk from the recent rise in the dollar, which would hit the value of sales from overseas. Tech outsourcing and consulting company Accenture Plc
Even if results and outlooks beat expectations, it may not be enough to push shares higher. Last month Oracle Corp
After leading the recent stock market rally, other tech companies might find themselves in the same position. The tech-heavy Nasdaq is up nearly 17 percent since the recent market bottom in February, compared to a 14 percent rise in the Standard & Poor's 500.
(Additional reporting by Ian Sherr in San Francisco; editing by Gunna Dickson)