IBM Eye

Philipp Gollner writes about US tech stocks such as Google and Apple, which have performed extremely well in 2005 being the exception rather than the norm. The argument is that there doesn’t seem to be the same bubble/bust cycle overall in tech stocks as has been seen in the past. That may point to a maturation of the IT industry, which is a natural evolution

Google, Apple stock surge may mask tech maturity

Investors may remember 2005 as the year technology stocks heated up again as shares of Google Inc. and Apple Computer Inc. soared. But those stocks may mask a maturing of an industry once notorious for boom-and-bust cycles, analysts said.

Google’s 118 percent surge in 2005 and Apple’s 122 percent leap contrast with the 1.8 percent gain of the technology-heavy Nasdaq Composite Index and the 3.4 percent advance of Standard & Poor’s 500 Index. The more sedate performance of the broader indexes suggests technology stocks have settled into a less volatile pattern after the tech bubble burst, analysts said.

“The way people still want to think about tech is they’re looking for a really smoking tech stock,” said Cindy Shaw, a computer hardware analyst at Moors & Cabot Capital Markets in San Francisco. “But the business is maturing. It’s a mid-single digit topline growth industry.”

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IBM, whose shares slumped 16 percent in 2005, may be an attractive long-term investment once the earnings drag of pension expensing begins to let up in 2008, Shaw of Moors & Cabot said.

“Three-to-four years ago, in the worst of the downturn, the only money they spent was because got they got a really good return on investment and got it quickly,” Shaw said. “It was all about saving money. Now, companies are spending money on technology to become more competitive and to gain new capabilities.”