How soon they forget.

Recent bad news for tech stocks -- the unpleasant signs and renewed wondering that have greased the

Nasdaq's

8.7% slide of the past three days -- is, for better or worse, to be expected, say buy-siders.

Developments such as

Sun Microsystems'

(SUNW) - Get Report

earnings warning,

EMC's

(EMC)

first layoffs in its history, and

Lucent's

(LU)

aborted merger with

Alcatel

(ALA)

shouldn't come as a shock, they say. And so perhaps investors should get ready for a period of retreat after the sharp rally of the last two months.

"This should not be a surprise to anybody," says Paul LeCoque, who runs the

LongView Capital

technology hedge fund. "Anybody who thinks that Q2 should be good is in the wrong business."

Great Expectations

The story on the second quarter has been, after all, that it will represent the bottoming of the market, a prelude to a tech recovery in the second half of the year. Well, just like their agricultural namesakes, troughs in the markets are messy, sloppy things.

The second-quarter bottom on the way to a recovery is still the basic story, says Marc Klee, co-portfolio manager of the

(NTTFX)

John Hancock Technology fund. Yet, he adds, "In the short term, reality invades. ... People wake up and realize it's not going to be a smooth road."

Ups and Downs
The Nasdaq this year

That bumpy ride will make for further "awful reading" in the earnings reports that come out, says Klee. "Some people are going to start to question whether or not we're going to see this economic recovery happen, and how quickly it will happen. ... You get an emotional yo-yo going back and forth between seeing the light at the end of the tunnel and seeing dark at the end of the tunnel. We're likely to see sharp up moves, and we're likely to see sharp corrections until it gets resolved, which I believe is more likely to be on the upside."

Compounding the shakiness is the contrast with last year's second-quarter earnings performance, says Klee. "Last year's second quarter was a particularly robust quarter. And this year you're comparing against that," he says. "This is a much less likely period of time for companies to come out with good news."

Speaking of bad news, one factor casting doubt on the second-half recovery's timely arrival are research reports such as

Banc of America Securities'

cutback of telecom estimates Wednesday and

Morgan Stanley's

warning that

the telecom equipment market might not turn around until the third quarter -- of 2002. "Technology is not a monolith," responds Klee, adding that other tech segments are likely to precede telecom. The worst is over in the PC business, he says; the semiconductor sector (except for the part devoted to communications chips) looks like it will be among the first to come back.

Season's Cycle

LongView's LeCoque says he sees the market's activity, including Wednesday's 4.2% drop on light trading, as part of a regular cycle. "People are getting cautious going into the third month of the quarter, which happens every quarter," he says. Despite negative announcements and a severe shortage of visibility, he points out that some companies have sent signals that things are getting better -- companies such as

Brocade

(BRCD)

,

Extreme Networks

(EXTR) - Get Report

and

PMC-Sierra

(PMCS)

, all of which he owns.

Another tech hedge fund manager, speaking on condition of anonymity, says he thinks that companies selling products with short shelf lives, such as some semiconductors, will be the first to recover among tech sectors. "I suspect that semiconductors, sometime late summer or early fall, are going to look better, and people will discount that in advance," he says.

In the best case, that buy-sider says, the tech recovery will start in the late second half, and be a spotty one.

There's a slim possibility, however, that "we're going through something that nobody who's living has been through," says the manager. But, he adds, "I think the odds of that are 10% to 15%, and that's probably high."

In the meantime, says the investor, if people's expectations are low, it doesn't take much to create a positive environment. "You don't need to have big absolute change," he says. "You just have to have some change beating lowered expectations."