2004: Software's Turn to Shine

More deals would likely give a boost to takeover targets. Other oft-speculated candidates include BEA Systems(BEAS), i2 Technologies(ITWO) and Retek(RETK).

Software stocks also stand to go up as hardware investors become increasingly jittery about their gains. The SOX's 10% decline in the first 10 days of December is a sample of some of the volatility that can hit that group.

"It's not so much that I think software is ready to take off as much as I'm concerned that hardware has gone too far," says Duane Roberts, portfolio manager at Dana Investment Advisors in Dallas-Ft. Worth. Roberts is looking to increase his software holdings, currently limited to Microsoft(MSFT) and Symantec(SYMC). "The valuations in general for software companies are much more attractive," he said.

With a price-to-earnings ratio of 23 times forward earnings -- vs. a software benchmark of 30 and a P/E over 50 for the Nasdaq 100 -- industry bellwether Microsoft is "pretty attractive" for a tech stock, Roberts declared. Microsoft shares have been weighed down by concerns over unearned revenue, a European Union antitrust investigation, Linux competition and security problems. But "we like the cash generation, the predictability of their earnings," Roberts said.

If more investors agree, Mr. Softee could lead software's move from wallflower to the life of the tech party.

	1.	2004: Software's Turn to Shine
	2.	Hedge Fund Craze Unlikely to Ebb
	3.	SEC: Second Fiddle, Out of Tune
	4.	Airlines Taxi Toward Profitability
	5.	Markets Can Still Cash In on Government Help
	6.	Economy Sobers Up, but Hangover Lingers
	7.	Sound, Fury but No Inflation
	8.	Market Rally Still Has Legs
	9.	Asset Allocation Done Right
	10.	The Five Biggest Scandals of 2003

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