SAN FRANCISCO -- With fears of a recession looming, the indications of a surprisingly upbeat fourth quarter from two tech giants are being taken very cautiously as a bellwether for the tech sector.The preannouncements from IBM ( IBM) and SAP ( SAP) Monday revealed no weakness in the tech sector for the seasonally strong last quarter of calendar 2007. Analysts on Monday warned that the quarter's reports may not extrapolate to a healthy first half of 2008, as other signs of a recession are starting to show. But
"Although the 2008 outlook for tech remains uncertain, we view IBM as defensive in the current environment," Goldman Sachs analyst David Bailey wrote in a note to investors Monday. A prolonged slowdown in capital spending on technology remains the biggest risk to the stock. IBM is an investment-banking client of the firm. "Our early checks indicate strength in global services (57% of revenue), with hardware (20%) and software (19%) coming in essentially in line with expectations," wrote Wu. Wu stated that he is concerned that IBM's current strength may not be sustainable in 2008. UBS analyst Ben Reitzes wrote Monday that he continues to be concerned about IBM's hardware and services revenue over the long term, but considers the Armonk, N.Y., company's software business to be its "crown jewel." Given the revenue and earnings disclosure, Reitzes raised his 2008 earnings estimate some 30 cents, to $8.20 per share. IBM is an investment-banking client of UBS.