This article originally appeared on April 29, 2013 on
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Sometimes it pays to break a sector into pieces.
Take the technology sector right now. It trades at just 13 times projected earnings, according to data from Bloomberg. That's the lowest valuation since Bloomberg began tracking the sector in 2006.
Bulls say that low valuation makes the sector a buy. Bears say that the low valuation is appropriate and tech stocks are headed even lower.
And this is the point where you need to break the sector into two separate parts.
If you look at technology companies that sell to the U.S. government, you're looking at lower revenue as the budget cuts from the sequester continue to phase in. If you're looking at technology companies that sell primarily to businesses -- what's called the "enterprise" market -- then you're looking at lower revenue until the third or fourth quarter of 2013 as corporate purchasing managers put off buying decisions until they have a better sense of U.S. and global economic growth sometime after the summer quarter.
But if you're looking at technology companies that sell to consumers, the story in the sector looks much like business as usual. Companies with hot products will see revenue jump. Companies that offer savings -- like free shipping or lower prices -- or that offer convenience will see earnings grow.
In other words the correct answer to the debate between technology bulls and bears is "It depends."
Unfortunately, for technology investors in general -- and for the U.S. stock market in general, which frequently depends on the technology sector for leadership in rallies -- the list of technology companies looking at a few tough quarters, at least, is relatively long.
That's already apparent from earnings reports this quarter.
, for example, which have substantial exposure to the government market, both disappointed Wall Street by falling short of projections in their most recent quarters. And the year doesn't look like it gets easier from here with the Obama administration's proposed budget showing a $2.5 billion decline in spending on information technology by fiscal 2015.