NEW YORK ( TheStreet) -- As technology giants report strong earnings and robust sales guidance, exchange-traded funds which track the technology sector are poised for growth and could pose an opportunity.
As the U.S. economy starts to stabilize, businesses are expected to upgrade software and hardware, which were one of the first things to be postponed during the "Great Recession" as cost-cutting efforts took precedent. According to market researcher IDC, sales of hardware are expected to rise by 6.4% and sales of software and technology are expected to jump 3% this year as firms upgrade servers, workstations, networking gear and storage systems.
To further boost appeal, increases in global personal computer sales will help bolster revenue. Shipments of PCs are expected to rise 22% this year as many buyers bypassed Windows Vista and demand in emerging markets, fueled by an increase in personal wealth, is ballooning.
This increased demand will likely make Microsoft (MSFT - Get Report) a clear winner as the company has already sold nearly 150 million copies of Windows 7 since its debut and the software is expected to be found on nearly nine in every 10 personal computers around the world.Other companies likely to reap the benefits of robust guidance in the technology sector include Oracle (ORCL - Get Report), which recently acquired server manufacturer Sun Microsystems, and the world's third-largest PC maker, Dell (DELL - Get Report). The Austin, Texas-based company is anticipating revenue to rise by 19% in 2010.
- Technology Select Sector SPDR (XLK), which give exposure to Microsoft, Oracle and Dell. XLK closed at $21.15 on Wednesday.
- Software HOLDRs (SWH - Get Report), which allocates 19.74% of its assets to SAP (SAP), which is expected to witness sales growth of 7%, 18.94% of its assets to Microsoft and 14.10% to Oracle. SWH closed at $38.01 on Wednesday.
- iShares Dow Jones US Technology (IYW), which gives exposure to Microsoft, Oracle and Dell. IYW closed at $53.58 on Wednesday.