Technology companies struggling to keep earnings up amid what's looking to be a protracted economic downturn have something else to worry about -- the stock market.

Tech mavens like

Intel

(INTC) - Get Report

that booked billions of dollars in investment gains in 2000 are going to find their portfolios substantially lighter this year. In the fourth quarter, several companies disclosed that their investments were performing poorly. For instance,

Compaq

(CPQ)

had to write down most of its investment in

CMGI

(CMGI)

-- to the tune of $1.8 billion. Software company

Adobe

(ADBE) - Get Report

, which has a venture capital fund, saw its gains fall more than 80% from a year earlier. (

TheStreet.com

looked at this issue in December, as well.)

Now the concern is that more bad news may be on the way. After all, the

Nasdaq Composite Index

has fallen another 8% this year, putting those portfolios at an even greater risk, since most of the investments are in tech companies. So earnings may weaken even more than expected.

Plenty of companies have jumped into the investing game over the past few years. The basic idea was to invest in companies that could help build demand. For instance,

Qualcomm

(QCOM) - Get Report

would invest in companies that would bolster use of its wireless technology.

Easy Money

But with the Nasdaq roaring along last year, companies saw the investments as easy ways to boost their earnings. Intel,

AT&T

(T) - Get Report

and

Microsoft

(MSFT) - Get Report

, among others, enjoyed fat gains.

Then the market changed and the gains weren't so easy. In the December quarter,

Gateway

(GTW)

had to take a $187 million charge to cover poor investments,

Hewlett-Packard

(HWP)

wrote down $365 million and

Yahoo!

(YHOO)

took a $163 million charge. Companies must take charges for investments when the market value falls below the cost of those investments. Like investment gains, those charges typically count as extraordinary items, which many analysts overlook but include in a company's bottom line.

In most cases, analysts exclude these gains and losses in making their closely watched estimates. But when times were good, some persuaded analysts to include the gains.

Intel, for instance, fought hard for this treatment. And it has helped. For 2000, Intel's gains on investments, interest and other income added $4.75 billion, or 31% of pretax income. That was up from $1.46 billion in 1999, or 13% of pretax income. Much of the $4.75 billion came from the $2.3 billion in gains and other income that Intel brought in during the second quarter for the sale of assets related to its investment in

Micron Technology

(MU) - Get Report

.

Diminishing Returns

But with the market weakening, those gains are dwindling. Even Intel says it doesn't look like there's going to be too much in the way of investment income. In fact, it told analysts in January to count on $180 million in investment gains, interest and other income for the first quarter -- and of that no gains will come from its venture capital unit

Intel Capital

. That compares with $640 million in the year-earlier quarter.

"It's a moot point," says

Drew Peck, an analyst at

SG Cowen

. From the beginning, Peck says he has been against including the gains. The policy, he says, is "preposterous." As an analyst, he says, how does he know what Intel will or won't sell during the quarter? He doesn't. When

First Call/Thomson Financial

called to ask him to start including a figure for gains in his estimate -- so his number would match with other analysts' estimates, he responded, "Zero." (SG Cowen hasn't done any underwriting for Intel.)

Don't expect Intel to turn around now and say it doesn't want the gains or losses included in the estimates, Peck says. Indeed, at this point Intel says it hasn't changed its policy of believing that analysts ought to include investment gains in their estimates.

"That's our current plan. We haven't changed our plan," Intel spokesman Tom Beerman says.

To Include or Exclude?

One analyst says that be the gains small or large, they shouldn't be included in earnings because the investment money distorts the bottom line figures, making it more difficult to value the company. Eric Ross, an analyst at

Thomas Weisel Partners

, says that investments boost the earnings, making the price-to-earnings ratio appear to be lower than it actually is. Instead of the company's P/E ratio being on par with other technology companies, it may appear to be closer to a financial company.

Still, Intel may have a tough time with earnings comparisons in this year's first and second quarters because the corresponding 2000 quarters had big gains. So investors are going to be staring at some harsh comparisons. "It's going to be difficult, in Intel's case specifically," Ross says.

Beerman says this is because of the decline in the value of Intel's portfolio as well as the gains that have already been taken through the sale of assets in that portfolio. Intel's portfolio, which stood at $10.8 billion on April 1, 2000, near the height of the market's bubble, was worth $3.7 billion at Dec. 30 after asset sales and depreciation.

Without the gains as a diversion in 2001, investors are going to be taking a closer look at Intel's and other technology's core businesses. And with the economy in a downturn, and all things technology hurting, they may be wishing it were the year 2000 again.