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The seemingly unending flow of second-quarter financial reports has finally come to a halt, with tech stocks posting better-than-average bottom-line gains. So why aren't investors happier?

"There doesn't seem to be a consensus," says Marc Klee, a portfolio manager with American Fund Advisors. "It doesn't look like the economy will roll over, but with oil prices high, ongoing concerns over terrorism and the malaise of the interest rate environment, there are reasons to be concerned."

Paradoxically, companies in many sectors are sitting on huge hoards of cash, but worries over the economy keep them from spending it on technology, says Brent McGibbon, principal of McGibbon Asset Management. McGibbon was encouraged by tech's solid quarter, "but I'm cool on the second half. If the Fed doesn't realize that oil prices are doing their job (slowing growth), we're in for some sad times," he said.

Even so, it was a good quarter. Tech stocks in the

S&P 500

reported bottom-line growth of 14% in the second quarter, compared with 11.9% by the overall index, according to Thomson First Call analyst John Butters. Sixty-four percent of the tech companies beat expectations, 26% percent matched, and just 10% missed their numbers.

Those numbers encourage Klee, despite his broader concerns, and he believes that barring a major economic shift, tech companies will see better bottom-line growth in the back half of the year.

Richard Williams, the chief software analyst for Garban Institutional Equities, had a darker view: "We had a slightly better-than-expected second quarter, with considerably worse-than-expected guidance."

What's more, software companies are no longer exhibiting robust top-line growth, he said. The 27 companies he covers grew revenue by just 2.31% when examined on a rolling four-quarter basis. The reason: "a buyer strike, caused by oil and other economic worries."

Not coincidentally, the energy sector outperformed the rest of the S&P, with bottom-line growth of 42%.

TechWeek Tidbits:

Hello, Haifa


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Israel-based chip design group may have found a way to cool down the company's high-margin server chips. Right now, says longtime chip analyst Nathan Brookwood, the powerful microprocessors run so hot and consume so much power that Intel is losing sales to archrival

Advanced Micro Devices

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. "Power and heat are huge issues," says Brookwood, who heads Insight64, an independent research firm. Corporate data centers built in the mid-1990s were not engineered to deliver the huge amounts of ever-more expensive electricity to power new generations of servers and the air conditioning needed to keep them cool.

The first fruit of the design group's latest work is a low-power chip called Yonah (Hebrew for Jonah) that will debut early next year. Although Yonah is a notebook chip, elements of its design will be central to Intel's next generation of server and desktop chips, expected in late 2006. Intel unveiled its plans at the company's annual developer forum, which brought more than 4,000 self-proclaimed propeller heads to San Francisco's Moscone Center this week.

More broadly, there's a debate going on among semiconductor investors; one side has the chip cycle close to topping out, now that some analysts believe capacity utilization has reached about 86%.

But the manager of a San Francisco-based hedge fund says investors should think twice before bailing out of the sector. The last few cycles topped out at 94% utilization, he says, and lead times are still stable or somewhat longer. When cycles top out and business is frenzied, lead times go up two or three times today's levels, book-to-bill ratios go way up, and prices firm. "We're not there yet," he says.

There is, of course, another side to the equation, and that's demand.

"At the end of the day,


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is the best indicator of real-time demand, and they missed on the top line by over $200 million," says Dan Niles, CEO of Neuberger Berman Technology Management. Sure, Dell had great unit sales, but to get there it had to go overboard in cutting prices. And then there's retailing giant


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, which recently said that the price of oil is finally putting a damper on consumer spending.

Niles is no bear when it comes to semiconductor stocks, but he does worry that higher interest rates and higher oil prices -- particularly with winter coming -- could slow things down, though growth in China and Eastern Europe could absorb some slack. (Niles has a position in Dell.)

Seagate Soars

Hard-drive maker

Seagate Technology

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received a dose of bad news when it was learned that


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will use flash memory instead of Seagate hard drives in the next version of its popular 4-gigabyte iPod Mini. But the Seagate apparently extended its lead in the global hard drive market in the second quarter, according to market researcher iSuppli, which follows the electronics industry. iSuppli found that Seagate's share of the market jumped to 30.5% from 28.6% in the first quarter -- the largest share gain in its segment.

Worldwide shipments rose to 89.7 million units in the second quarter, an increase of 2.8%. Analyst Krishna Chander says the increase was somewhat surprising, since the second quarter is typically the slowest of the year for drive makers. "Strong demand for computers and consumer electronics products generated abnormally robust conditions for

hard-drive makers in the second quarter," he said.

Leaving the impact on Seagate and other drive makers aside, Apple's move to flash memory is emblematic of just how much clout the company has accumulated. To produce the new iPod, Apple has contracted to buy as much as 40% of


output of NAND flash memory in the second half of this year, says iSuppli's Nam Hyung to Kim. That's a potentially huge portion of global NAND output, the analyst said, since Samsung alone accounted for 55% of the sales of NAND memory in the second quarter.

The iPod doesn't get


the credit, but the popular music players have helped Apple shares jump by a phenomenal 179% in the last 12 months, 12 times the performance of the

Nasdaq Composite