It's been called one of the most crushing economic periods in generations. The recession, compounded by the credit crisis, has now lingered halfway into its second year.

The market has taken a beating, but tech has shown remarkable stability despite weak sales and limited access to new cash.

The big pillars of tech like


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, weathered the past year of formidable challenges in good shape. Even though top line growth was challenging in 2008, each outfit posted year-over-year increases in income, staff and even cash piles.

As these players prove, strong balance sheets are the winning defense when sales growth vanishes. For Apple, wealth is an offensive weapon to be used to push new designs and attack growth. But for the other well-to-do tech shops, cost-cutting and cash conservation isn't a fad but a practice that may around for awhile.

You won't see a return to consistent sales growth for several years, says long-time tech watcher Dan Niles co-chief investment officer with Alpha One Capital Partners. Consumer spending will eventually lead the revival, but there's a great deal of adjustment that needs to be made before people can spend freely again, says Niles.

"We've been through a 25-year period of leveraging up. Now we are in an environment where people are worried about their future," says Niles. "The balance sheet of the average consumer is about as bad as the balance sheet of the average bank."

Listen to the entire interview with Dan Niles


Businesses aren't in much better shape either, and that makes IT spending similarly challenged. Companies facing a tough economy won't shell out extra cash for new data networks or PCs.

There are even some concerns that Microsoft's new Windows 7 operating system won't necessarily offer enough benefits to convince business managers to undergo a costly system upgrade.

Apple Unbruised

But, as Apple shows, a tight focus and a hot product cycle can certainly let you whistle through the down times. Apple's booming success with the iPhone has helped the company offset the slowdown in Mac and iPod sales.

Unlike many other tech shops, Apple has continued to spend and hire through the recession.

"Apple is very confident and very focused," says Morgan Keegan analyst Tavis McCourt. "They are true believers in what they are doing over the long run, and that gives them confidence to invest."

How bold? Apple boosted its staff size by nearly half last year while increasing its profits by 37% and bumping its cash position up 59%.

McCourt is bullish on tech and thinks the era of cost cuts may be nearing its end. He points to how quickly the chip sector adjusted after demand collapsed last year and inventory flooded the market, albeit at a much lower revenue level.

"If the whole world was run as well as the tech sector," McCourt says, "these recessions would last a quarter or two, and we'd be done with it."

While this has been a period of healthy survival for our big four tech shops, it hasn't come without pain. Only Apple managed to avoid staff cuts this year. That said, however, the cuts weren't deep at Cisco and Microsoft, and in Google's case the jobs eliminated were mostly in recruiting.

Bigger, more stable companies have a distinct advantage in these lean times, says Niles.

"In this environment, the companies that don't have survivability questions will be the ones to benefit," says Niles. "The big companies will take advantage of the smaller companies."

This could prove insightful for investors looking for a prudent approach to tech stocks.

"In the next several years," Niles says, "the more stodgy companies are going to be the best investments."