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Breaking Down the Tech Sector

By financials and commodities lose steam, technology is finally getting a little love.

I'm looking at a few cross currents that support the thesis that we could be in for a secular run in technology (and heath care, but that's not where I live). IT budgets have been growing at around 5-7% per year since 2002. As I continue to sift through examples of IT departments being penny wise and dollar foolish, and communicate that to my contacts who make IT purchases, there are two certainties: certain enterprise upgrades will be mandatory next year and they are becoming increasingly reliant upon their channel partners because of the race to monetize new opportunities coupled with a shortage of talent.

Can you say sector rotation? Jobless claims come in a little higher than expected (IT hiring has been off the charts) so that's been offset heavily by losses of jobs in housing. Web 2.0, virtualization, 3G and 4G, Wi-max, compliance and security, security security! My contacts are telling me about ramping budgets in specific areas of IT. There are going to be some big refreshes and it seems that as financials and commodities lose steam, technology is finally getting a little love. There is a whole group of buyers that were ignoring tech in favor of their favorite growth sectors. With that coming to a conclusion, I think we're in for a nice multi-year run into the end of the decade in technology.

I am really warming up to security. I read an article this morning; TJX (TJX) had 20 million credit card numbers stolen over an 18 month period. Between restitution, diagnosing the problem and fixing it, it will cost the company about $150 million. If it would have properly secured its network and servers in the first place, it would have cost TJX between $2-3 million.

It's a big part of the Microsoft (MSFT) refresh. MacAfee (MFE) and Symantec (SYMC). You just have to do your due diligence and make sure you are buying company with security suites.

The single point solution providers will lose unless they get acquired. Nokia (NOK) has been running but it is gaining market share and about to launch a whole new product cycle taking dead aim at the high end handset market. I'm bullish on that story.
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