The

Nasdaq

gave back more than two months of gains this week, and with home prices softening, interest rates still going up and the hurricane season not far away, some tech watchers are bracing for a rough few quarters -- at the very least.

"The market was waiting to go down," says Hilary Kramer, chief strategist at ANG Capital. "Any bad news, not just

Dell

(DELL) - Get Report

, would have done it."

Kramer, who predicted a downturn two months ago, is worried enough that she's advising clients to move at least some of their worth into cash positions until visibility improves. The gains of the first half of the year, she says, were fueled by the huge cash infusion (about $250 billion) from state pension funds in January and February. Much of that money went to leveraged hedge funds, which bet long on tech and are now taking money off the table, says Kramer. If there's another catalyst for sustained tech growth at the moment, Kramer doesn't see it.

Meanwhile, consumers, who have done much of the spending that technology companies depend on, are waking up to find that their home is no longer a cash machine. Their spending has grown despite higher energy prices, steeper credit card rates and the devastating hurricanes of 2005. "Ordinarily that would slow spending," says Lakshman Achuthan, managing director of the Economic Cycle Research Institute, or ECRI. Why didn't it? Increasing home prices have outweighed the negatives, he says.

But with most economists saying that the best days of the housing boom (or bubble) are behind us, and the job market unlikely to better its current modest growth, it's hard to see a catalyst for such high levels of discretionary spending.

Consider this week's announcement that

Sony

(SONY)

will price the full-featured version of its new PlayStation 3 at $599. "It probably would have worked well last year, but I'm not sure it works this year," he says.

Achuthan makes no claims to extensive knowledge of the video game market, of course. But if you agree with his thesis that the housing boom has fueled much of the consumer spending boom, there's reason to worry about technology companies that expect their customers to shell out more than $800 for a console and three or four games.

Not all of ECRI's tea leaves are negative, however. Inflation, the No. 1 worry of many economists, has actually moderated in four of the last six months, and increased only incrementally in the other two, Achuthan says. And there's nothing in his basket of leading indicators that points to a recession.

Bonus Babies

When

SAP

(SAP) - Get Report

CEO Henning Kagermann takes the stage at the German software giant's huge customer confab (10,000 people are expected) in Orlando, Fla., next week, he'll have more than the usual incentive to deliver a bravura performance. Kagermann and the rest of the company's executive board could share a bonus of up to 100 million euros (about $128 million) if they can double SAP's market cap by the end of 2010, or earlier.

Another 200 million euros could also be divided among other groups of senior managers and key contributors, the company said at its shareholder meeting in Mannheim, Germany, this week.

Moving the market cap that much will require real growth. The managers will be working against a base of about $57 billion, SAP's average value in late 2005, meaning the company will have to be almost as large as

IBM

(IBM) - Get Report

is today to see the bonus.

Much of the discussion at the Sapphire conference will center on SAP's ambitious plans to move beyond its area of strength -- large enterprises -- and deeper into the midmarket. Small and medium-sized businesses, which SAP defines as companies with $1 billion in revenue and 2,500 or fewer employees, account for some 30% of its new business on a rolling four-quarter basis. Kagermann & Co. say they want to push that number to 40% to 45% by 2010.

You can also expect the company to announce a number of enhancements to its on-demand customer relationship-management software offering -- moves calculated to keep the pressure on both

Oracle

(ORCL) - Get Report

, which is still digesting one-time CRM leader Siebel Systems, and

Salesforce.com

(CRM) - Get Report

.

It's worth noting that the value of SAP's ADRs has grown by 45% over the last two years, compared with Oracle's appreciation of 20%, the Nasdaq's rise of 19% and the 33% drop for the Goldman Sachs Software Index.

Number to Watch

Speaking of Salesforce, when the upstart San Francisco-based company reports first-quarter earnings Wednesday, investors will be looking hard at new subscriber growth. Shares of the on-demand software provider have slid some 13% since early April, and if the company doesn't reach 44,000 or 45,000 net new subscribers, Wall Street will not be happy, says Goldman Sachs analyst Rick Sherlund.

Paying subscribers rose 76% over the previous year by a record 48,000 during the fourth quarter. If the company matched consensus in the recently completed first quarter, growth will have slowed to about 11% sequentially and a still-robust 66% year over year.

Tell It to Ballmer

Microsoft

(MSFT) - Get Report

will spend in excess of $2 billion in 2007 to fix MSN and prepare other parts of the company for the expected grudge match with

Google

and

Yahoo!

. Not everyone thinks that's the best use of the company's cash, and I

asked readers if they had a better idea. Here's an excerpt from an interesting reply by Gregg Smith:

"Microsoft should innovate toward simplicity. How about a completelystable and secure, blank desktop? A PLATFORM, no more, no less. Seamlessintegration with the Internet, plain Windows, plain programs. Not quite opensource, but designed with the idea that individuals can jazz their computers up with the features they want, not buy them pre-jazzed. Computer users don't need video built into the OS, there are 50 differentplayers available for free online. I'll pick the one I want."