The dark cloud that has hung over the technology sector for months has showed some signs of lifting after major players in the industry suggested business had hit bottom and would improve in the second half of the year.
Stocks rallied across the sector and the positive sentiment was reinforced Wednesday after the market closed, when IBM reported strong first-quarter earnings and reaffirmed its targets for the rest of the year.
No. 1 computer chip maker Intel, which ignited Wednesday's rally with its positive outlook the night before, rose more than 20 percent, helping lift the tech-laden Nasdaq.
"It certainly feels like a bottom," said Tim Ghriskey, portfolio manager of the US$4 billion Dreyfus Fund. "The tone we're hearing from management is just much better, and Intel saying that business at the end of March picked up - and that the pickup is continuing into April - is very positive."
IBM, which reported net income rose 15 percent in the first quarter, reaffirmed a previous target to deliver high-single digit sales growth, excluding currency effects.
Top software and personal computer makers, as well as battered dot-com companies, also chimed in with hopeful comments, a sharp contrast to the gloom that has been spreading since late last year.
But Wednesday's rally, which lifted shares of many technology companies by double-digit percentages, could simply be a bump in a continuing downturn, as a similar boost in January proved to be.
Stronger second half
The shift in the way executives are talking about the future is nevertheless striking.
Just a few months after warning that technology spending was slowing abruptly, with no end in sight, Hewlett-Packard has forecast a flat third quarter with strengthening margins.
Intel, which in March warned that weaker demand for personal computers was spreading to networking, communications and server sectors, has made encouraging comments about its largest business segment.
Investors embraced the news as a key indicator of an upcoming recovery.
Analysts say strength among chip makers is good news for pure-play Internet companies such as Yahoo and CNET Networks, which would reap the benefits of bigger advertising budgets that come with an upturn in the business cycle.
US software maker Interwoven expects a downturn in spending on software to bottom out in the second quarter.
Chip-equipment companies have also held steady over the last several months, surging on the days after major drops. But with the earnings season just kicking off, optimism could easily revert into fear.
