Monday, June 6, 2005, Internet shares led the tech sector for most of last
week, while software shares remained laggards. Google benefited from several
upbeat research notes, hoisting its peers. The strength could continue, with
Merrill Lynch noting that according to Forrester Research, eCommerce growth
reached 24% in 2004 and continued sector growth of 22% is projected for 2005.
The research indicates strong migration of U.S. retail sales online, and "we
expect U.S. eCommerce sales growth to exceed offline growth by at least 10%
annually through 2010," concluded Merrill. Some investors may wonder how long
the Internet, and for that matter, the tech, rallies will go on. A wind of
optimism seems to be blowing, with some analysts noting that bearishness early
in the year now has to give way to discount buying, especially since earnings
estimates have been stabilizing, lessening the risk of a disappointment. Other
pundits point out that anticipation of consolidation should also draw money to
the sector, and last week's events, such as Sun Microsystems' decision to buy
Storage Technology, could reinforce the perception. Amid other possible
sources of support for techs, Charles Schwab's Liz Ann Sonders remarks in a
CNNMoney piece that "capital spending continues to play catch up with what has
been strong consumer spending." Finally, some analysts find that techs are now
more attractive relative to other sectors given changes to the macro
environment. Talking to the news service, Driehaus Capital Management's Brian
Nelson states, "This is the most attractive technology has looked in some
time. The dollar is appreciating relative to the euro and that's scaring
people away from emerging markets and oil. People are moving out of energy and
into tech." Nevertheless, beware ... While the first-quarter reporting season
is nearly over, the profit warning season will soon be upon us.
High-Tech Monday Update is provided courtesy of Thomson Financial. This
information is believed to be true and accurate; we take no responsibility for
inaccurate information and reserve the right to update our reports. For more
information, please visit our web site at http://www.thomson.com/financial.
SOURCE Thomson Financial Corporate Group
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