IBM Hits New High

Cisco's Chief Executive John Chambers has said that the growth prospects for international sales are the brightest he's ever seen. The Internet gear maker's sales in emerging markets grew 37%, vs. 23% for the U.S. and Canada.

Similarly, IBM's sales in emerging markets grew 32% in the previous quarter.

Further helping the sector, tech stocks have been aggressively buying back their shares. According to Standard and Poor's, technology companies spent nearly $27 billion buying back shares in the first quarter of 2007. That accounted for 23% of the total amount spent on stock repurchases and exceeded all other industries.

Mutual fund manager DWS recently told investors in its (KTCAX Quote - Cramer on KTCAX - Stock Picks)Technology Fund that tech companies are likely to use the cash hoards sitting on their balance sheets to continue their share repurchase plans. DWS also said that buybacks are attractive because they can provide a "valuation floor" to dampen the effects of a market downturn on tech stock valuations.

IBM has been the most aggressive, buying back $14.6 billion of stock -- about 9% of all shares outstanding -- in the second quarter.

IBM's plans to increase sales of software can help the company's profitability, as software carriers have wider profit margins than hardware and services. Also, the recurring revenue from software licenses can help smooth IBM's revenue if economic growth slows and hardware sales moderate.

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