Finding bright spots in a quarter as horrid as the one personal-computer stocks have just completed isn't an easy project. Some might even call it perverse.

With the possible exception of

IBM

(IBM) - Get Report

, every major PC manufacturer saw sales collapse. Meanwhile, plummeting prices for PCs put profit margins, when they existed at all, under severe pressure. And none of the companies have been able to give investors even a rudimentary sense that things are improving. Last Thursday, on its earnings conference call,

Hewlett-Packard

(HWP)

tried to moderate the bad news by saying that business looked slightly better in January than in December. But an hour later, on its own call,

Dell

(DELL) - Get Report

said just the opposite: Things looked even worse in the most recent month.

Wednesday's Coverage

PC Makers Bogged Down in the Price War

Previously

Bottom-Fishing the Murky Depths of the Chip Sector

Internet Companies Trudge Into the Fog

For Banks, Hitting the Loan Books

Getting a Handle on the Wireless-Handset Slowdown

Why This Earnings Season Has Been So Brutal

Earnings Burned Investors, but the Tech Fire Remains

With No Catalyst, Stocks Rumbling and Stumbling Through February

Across the sector, the one positive industry metric is inventories. Very aggressive price-cutting campaigns seem to have gotten channel inventories down to nearly normal levels, in most cases about half the level they were at a few months ago. But it's important to remember that despite that drawing down of inventories, companies continue to sell their PCs at fire-sale prices. You can chalk that phenomenon up to Dell, which, true to its history, is using discounting to gain market share.

In the meantime, investors will have to wait for the same phenomenon to which industry executives themselves are so anxiously looking: a second-half rebound in demand, aided by the

Federal Reserve's ongoing easing campaign. With that in mind, investors should keep an eye on the following issues at the companies as the next quarter rolls along:

Apple said it will return to profitability in its current quarter. But it desperately needs consumer demand to come back from the dead, despite CEO Steve Jobs' recent assessment of the U.S. economy as "melting down." New read/write CD/DVD drives should make its pricey hardware somewhat more attractive to consumers. But the more important spur in demand will be some time in coming, for the company's new OS/X operating system won't be shipped with new PCs until July.

Compaq cut guidance for 2001 sales growth to 6%-8%, from 10%. But it kept guidance for 2001 earnings growth at 20% to 25%.

To pull off this high-wire act, Compaq may need to cede PC market share to companies like

Gateway

(GTW)

and Dell, effectively migrating its sales toward more profitable enterprise-hardware businesses like storage, servers and services. Sounds good, but competition for those businesses -- think names like

EMC

(EMC)

,

Sun Microsystems

(SUNW) - Get Report

and IBM -- is stiff.

Dell said January looked slightly worse than December. The company cut first-quarter earnings and revenue guidance, lowering its EPS forecast to 17 cents a share from 19 and slashing its sales estimate to $8 billion from $8.4 billion.

Buying Dell now is a bet that the company will win the PC price war. That's a long-term bet: Poor demand could keep profits and sales under pressure for the foreseeable future. Analysts expect profits at Dell, which trades at more than 25 times forward earnings, will decline by 5% this year.

At Hewlett-Packard, forget about the old target of 15% sales growth. CEO Carly Fiorina says she doesn't expect the company to get percentage revenue growth into the double digits for the rest of the year.

The really bad news is that it wasn't just PCs and printers that crushed H-P's quarter. The company also had serious execution problems in its server segment. The turnaround story at H-P under Fiorina, whose job investors will likely be calling for if new disasters crop up, looks dicier than ever.

IBM confirmed consensus estimates for earnings and revenue growth of 12% and 8%, respectively. PCs were actually a bright spot, reflecting the company's decision to pull out of the unprofitable U.S. retail channel. Sales grew 15%, and the segment was profitable.

As always, IBM is a long-term story. Can the company use its huge software and services operations to offset the slow growth and shrinking margins in its hardware business? How long can CEO Lou Gerstner continue to manage the bottom line with such aplomb?

Gateway slashed guidance for 2001 sales and earnings growth to 3% and 6%, respectively. The premature release of Gateway's earnings report, and the subsequent replacement of most of its management team, suggests the sense of urgency at the company. Gateway now must reduce headcount while building market share in a long-term price war with industry giant Dell. The company's new management has its job cut out for it.