The long-predicted improvement in corporate spending may finally be coming to pass, albeit on a modest scale. And it couldn't have come at a better time, given signs that consumers are at last slowing down after several years of licentious buying.

Consumers have largely supported the technology rebound so far by snapping up fancy cell phones, DVDs and notebook computers. But as a note out from Merrill Lynch analyst Steve Milunovich points out, recent data suggest consumer's wallets are under pressure. Among the tip-offs:

Lexmark

(LXK)

reported softer-than-expected consumer inkjet sales in the third quarter, leading to a continued inventory build.

Gartner said third-quarter PC shipments in the U.S. fell below its expectations, up only 5% instead of the 9% the firm predicted in September (itself a reduction from Gartner's initial forecast of 11% growth in June).

Though Gartner is still crunching the numbers, it's a fair bet that the shortfall in PC shipments came more from the consumer side than from the commercial side.

Throughout most of 2002 and 2003, consumer demand for PCs grew faster than demand by businesses, though the latter accounts for about two-thirds of the market. But starting in the second quarter of this year, the situation reversed and for the first time in a long string of quarters, demand for PCs was greater among businesses than among consumers.

Gartner principal analyst George Shiffler said while the research firm is still crunching data on the third quarter, he suspects that the recent softness in PC shipments once again came more from the consumer side, since consumers stand to be more immediately affected by high oil prices and weak employment growth.

There's reason to think that

consumer holiday spending could be uninspired for some of the same macroeconomic reasons. Merrill points to the following:

Higher gasoline prices threaten to gradually crimp consumer discretionary spending. U.S. crude oil has reached a record high of over $55 a barrel after starting the year at around $32.

Taxpayers this year won't receive the $300 tax rebate they pocketed last year as part of President Bush's fiscal stimulus plan.

Consumer sentiment readings from the University of Michigan hit an 18-month low of 87.5 in October, well below expectations of 94. Merrill says consumer confidence levels are now on par with those after the 1987 stock market crash.

Merrill strategist Richard Bernstein, who's been advising investors to underweight consumer discretionary stocks, points out that real wage growth remains negative. A surge in initial jobless claims suggests employment and wage gains will remain under pressure.

Just as consumers are weakening, several big earnings reports suggest that corporate-sector spending looks relatively sturdier.

IBM

(IBM) - Get Report

said revenue growth in the Americas accelerated from 2% in the second quarter to 7% in the third quarter.

That's not to say IBM is a poster child for growth. Stripping out currency benefits, the company's overall revenue grew a mere 5% in the third quarter.

Still, the larger point is that enterprise-oriented companies may see more stable growth, at least in the near future.

EMC

(EMC)

said spending on storage should rise 7% this year, notes Merrill.

"We have suggested tech investors be prepared to move money from consumer to enterprise-driven names. That time may finally be here," concluded Merrill analyst Milunovich.

Year to date, Merrill found that a sample of 15 tech companies that draw more than half their revenue from consumers have outperformed companies with little or no consumer revenue by an average of 36%. Stocks on the consumer list include

Amazon.com

(AMZN) - Get Report

,

eBay

(EBAY) - Get Report

,

Electronic Arts

( ERTS) and

Apple Computer

(AAPL) - Get Report

.

However, that outperformance may be peaking, Milunovich said, suggesting that the time is right to cycle into stocks that will benefit from more stable corporate buying.

"Though we question the magnitude of corporate IT spending improvement next year, the seasonal budget flush should help enterprise vendors and perhaps their stocks in the fourth quarter," he said. (Merrill has an investment banking relationship with IBM.)

Enterprise stocks (defined as those that draw less than 35% of revenues from consumers) with a buy rating from Merrill include IBM,

Oracle

(ORCL) - Get Report

,

Veritas

(VRTS) - Get Report

and

Unisys

(UIS) - Get Report

.