TechWeek: Where's the Love?

Or consider the stutter-stepping in a note by Goldman Sachs hardware analyst Laura Conigliaro, who raised her 2007 earnings estimate on IBM, kept her price target at 107 and then damned the company with very faint praise: "The IBM earnings stew somehow managed to mix together an even more varied combination of strengths, disappointments, and confusion than usual.

"While the quarter, and its implications for future growth, was strong and better-balanced than we've seen in over a year, unexpected investments in sales and incremental acquisition expense yielded gross margins that were lower than last year's December quarter in all three of IBM key segments (software, services, hardware)," she said in a note to clients. Goldman has an investment banking relationship with IBM.

Fair enough. But is it right to fault an acquisition strategy that has turned software from a lumbering elephant to Big Blue's largest driver of profits?

Reasons to Worry

Behind the pessimism is increasing doubt that the Federal Reserve will move to cut interest rates any time soon. "Without a cut you won't see multiples expand in sensitive stocks like technology and retail," Snorek said.

Also, a slowdown in telecom, whose business ripples throughout the technology food chain, has fund managers very worried. "Just look at the large percentage that communications contributes to many technology companies. It's a significant problem, and I'm surprised the market hasn't pulled back even more," says Pat Becker Jr. of Becker Asset Management.