If you want to talk about strength in the PC-boxmaker sector while technology stocks are going through unprecedented convulsions, you're going to have to talk about relative strength: They only look really good next to those dot-com flameouts.

All things considered, the relative strength of the major PC companies hasn't been so bad. Since the wheels started coming off the tech momentum train on March 27, the

Philadelphia Stock Exchange Computer Boxmaker Index

, or BMX, has lost about 12%. That's a very respectable performance compared to the 27% beating taken by the

Nasdaq Composite Index

and the harrowing 37% loss in

TheStreet.com Internet Sector Index

.

These Days, Strength Is Relative
The Boxmakers have held up fairly well

Computer hardware had a tough day April 12 in a selloff triggered by

Goldman Sachs

analyst Rick Sherlund, who said that poor corporate demand for PCs had caused him to cut his first-quarter revenue estimates on

Microsoft

(MSFT) - Get Report

. Coming on top of a warning by

Compuware

(CPWR)

, Sherlund's call sent already nervous investors stampeding out of the sector. The BMX sank 7%, with heavy selling distributed broadly among components like

Hewlett Packard

(HWP)

,

Dell

(DELL) - Get Report

and

Apple

(AAPL) - Get Report

.

Still, when the boxmakers tanked along with the rest of the market on April 14, in one of the largest selloffs ever, it was fear, not fundamentals, that was driving the action, say the sector's boosters. They point to a rotation back to high-quality growth stocks, including PC makers, since then. Indeed, many of the hardest-hit issues are back at the levels they were trading at before things fell apart.

What are the fundamentals that shore up the bulls' argument? The first-quarter slowdown in PC demand cited by Sherlund did in fact show up in earnings reports by

Gateway

(GTW)

and

IBM

(IBM) - Get Report

, but no one was particularly surprised. The market had been buzzing with word of Y2K hangovers for months, and most observers agree that demand will pick up sharply in the second-half of 2000. Moreover, the blowout quarter from

Sun Microsystems

(SUNW) - Get Report

last week suggested that any first-quarter weakness in corporate demand was largely isolated to the desktop market, not servers and other "big iron."

"It should be the best year since 1996," says

Robertson Stephens

analyst Dan Niles.

Still, despite their consistent, strong earnings growth -- witness Apple's strong quarter -- many investors are not willing to bid up shares at this point. Apple dropped by 2 1/4 Thursday after reporting a 47% jump in earnings and plans for a stock split. Why? Partly because Apple shares are still selling at four times their 52-week low.

Indeed, most boxmaker stocks remain richly valued, with the BMX still up about 100% from its year-ago level. What keeps the shares from rising higher is a suspicion that desktop PC sales are near their peak. Now, boxmakers are trying to prove to investors that they can adapt to a post-PC world and develop profitable "beyond-the-box" operations. These issues will be front-and-center on Tuesday when troubled

Compaq

(CPQ)

reports its first-quarter results.