Faced with more downgrades and worries over slowing IT spending, tech companies started the New Year on the same gloomy foot that they ended 2000. But at least one analyst had something positive to say this morning.

Merrill Lynch

analyst Tom Kraemer put in a good note for storage companies

Brocade

(BRCD)

,

EMC

(EMC)

and

Network Appliance

(NTAP) - Get Report

, a day after

Robertson Stephens

unleashed a

wholesale ratings cut on network storage and software stocks. Kraemer said he believes in the ability of these companies and others "to maintain pricing and margins."

Brocade was lately down $2.63, or 3.5%, to $73 in trading on the

Nasdaq

, while EMC gained $2.81, or 5.2%, to $57.13 in trading on the Big Board. Network Appliance traded down $1.38, or 2.7%, to $50.13 on the Nasdaq.

In his research note, Kraemer said he expects "storage to weather the storm better since its earnings stream will be more reliable than almost any other area of technology," even as he sees "more volatility in the first half of 2001."

Kraemer cautioned that an "economic slowdown, aggressive purchases in front of Y2K and elongated purchase cycles, could delay the tech recovery that consensus expects to come in late spring 2001." He cited a "dramatic slowing of IT spending" and spending intentions that "seem to be in flux."

Nonetheless, he said, "we continue to like SAN (storage-area network), NAS (network-attached storage), and storage where CIOs indicate spending will accelerate."

"The dot-bomb enterprise impact suggests several things about tech: It's still a cyclical industry. The last few years conspired to hide cyclicality. Purchase cycles will lengthen," Kraemer wrote.