IBM: Proving That Tech Sector Is Strong?

You knew it was coming simply because we all know that stocks, particularly tech stocks, don't move in only one direction despite what we've seen since Jan. 1.

It took a stunning IBMpre-announcement to get the ball rolling, and that ball is rolling, fast. But should we all be surprised? I think not. The fact is, the fundamentals for so many of the biggest names in the tech sector have been strong, remain strong, and look strong from here forward.

I have detailed at length the recession concerns dogging the broader U.S. markets. I have detailed at length the worries that many of these top names have peaked, including Apple,Google, Oracle,Microsoft,Intel and others.


But all along, through the numerous interviews I've done with some of the top names both in the C-suite and those covering the C-suite, I have found that these concerns have been overdone. That the sell-off recently was overdone. That, as Intel's CEO Paul Otellini told me just last week, it's a big world out there and just because the U.S. is on shaky financial ground, emerging markets like Russia, Asia, parts of Europe, Brazil and others are in a position to offset domestic weakness.

And even as we tried to detail that domestic consumer weakness, we got blow-out numbers from Best Buy just a few weeks ago that would indicate shoppers have an unquenchable appetite for all kinds of electronics. Not abroad, but here. That's the consumer.

Now we have some cold hard facts from IBM that the enterprise is also firing on all cylinders, warming the hearts and wallets of so many tech investors still trying to sleep off that New Year's hangover. IBM took the extraordinary step of pre-announcing blockbuster numbers, beating the Street by a staggering 20 cents a share on much higher-than-expected revenue. The numbers are mind-blowing, but the trends are not.

I have been talking about this in the weeks leading up to last week's Consumer Electronics Show. I have been talking about these trends during CES, even in the face of the ongoing tech wreck gripping investors on Wall Street. I talked about them leading up to this week's big Apple love-fest in San Francisco, the Macworld trade show that kicks off in San Francisco today. And I'll be talking about these trends through the course of earnings season which begins Tuesday for the tech world when Intel reports its numbers.

I don't want to be a Pollyanna here: There are worries that an inventory build at Intel could hurt numbers this time around, so we'll be watching those figures extremely carefully. There's a concern that Dell's numbers might be softer than expected; that Texas Instruments is seeing rising inventories as well.

The European Union is launching another investigation into Microsoft. There are issues, sure. But as I keep saying, there are key opportunities here for the choosy investor who seeks out the best-in-class names in the hottest sectors where fundamentals, and a focus on international business, are still strong.

IBM isn't the be-all, end-all. But this is a key part of the tech investor puzzle that could send positive ripples through so many sectors in tech.

I'm certainly curious about your thoughts: are you getting in? Staying on the sidelines? Where are you putting your money. Let me know. I think we need to get a discussion going. Broad-based sell-offs always raise red flags for me. I'm just hoping tech investors don't start displaying the white flag, and give up on so many of these innovative companies.

Questions? Comments?