Six Things We Learned About Tech Last Month

Are you still standing?

Have you decided, reluctantly or vehemently, to stick with tech stocks, nurturing a nagging feeling that there is -- somewhere, sometime -- a way back into this sector that was only a few short weeks ago deemed recession-proof?

Great. Let's recap what we learned (or had to relearn) in that tumultuous month of January 2008 so we can march forward better informed -- or at the very least offer up a few more talking points at cocktail parties.

1. Giants age - quickly so. Middle age happens to all of us, eventually. For Internet companies, it tends to strike at the first-decade milepost. Google has staved off the stiff limbs and sedentary impulses that other Internet leaders from the 1990s have struggled with. But, it seems, that may be history.

Ever since it went public, Google's search and advertising technologies have been a cornucopia of growth. Bears would ask what its follow-up act would be, where revenue would come from once search flattened out, etc. Yet growth kept gushing forth, so no one cared much.

Today, Google's stock is falling, not because it's getting sideswiped by an economic slowdown, but because revenue growth is slowing on its own.

That big fat deal with News Corp.'s MySpace isn't -- in money terms -- what it should have been, as Google CFO George Reyes confessed in Thursday's conference call. And for some confounding reason, people are clicking less on AdSense links than Google wants them to.

Those non-search revenue streams -- Google Apps, YouTube revenue sharing -- better start delivering soon, because after five years the old safety net is fraying.

2. Yahoo! will get better, but it'll get much worse first.

Are you listening, Steve Ballmer?

Remember those movies where someone is treading a rickety footbridge of rope and wood planks, and it just may collapse halfway there? That's Yahoo!.

Investors are on the near side of a steep canyon. On the other side is solid rock and paths to riches. But certain peril stands between the two. Right now, the only question is whose investors will make that terrible journey. Is it Microsoft's , should it control Yahoo!, or Yahoo!'s alone? The journey, whether its respective CEO Jerry Yang's or Steve Ballmer's, won't be fun.

Yes, Yahoo has been making moves -- like incorporating del.icio.us into search results - that, in hindsight, it should have made a year or so ago. Meanwhile, Yahoo! had been buffeted down 12% in the past week because of the paltry fruits of seeds planted in quarters past.

That plank beneath Yahoo!'s front axle is splintering now, but it may well be that the stock crosses over to solid ground by the end of the year. Until then, expect rockin' and rollin'.

3. Healthy stocks are cheaper, and I feel fine. IBM's (IBM Quote) fourth quarter -- nice. Microsoft -- pretty good. So why doesn't it show in their stocks?

It will. IBM did well in 2007, closing the year at $108, up 13% in the year. Yet despite surprisingly strong earnings last month, it finished Thursday at $107. That's not to say it's been stable, it spent January between $97 and $108.

IBM has a history of rising when the tech sector is falling. In late 1998, it rose 6% while the Nasdaq fell by one-third. And it rose 20% between March 2000 and December 2001, while the Nasdaq lost 60%.

Now, IBM is 15 times last year's earnings, below the 16.5 average ratio for the beaten-down S&P 500. It's 13 times the 2008 estimates.

Microsoft, before its Yahoo! bid, was down a relatively healthy 8% this year, thanks to a scattershot portfolio that embraces a dying PC software business, stronger-than-expected Vista sales, video games and stuff from health to robotics. That kind of mixed bag looked eclectic a few months ago, but seems sanely diversified now.