On Semiconductor

Shopping for tech

November 22, 2010: 3:00 AM ET

After two years of tight budgets, big companies have started spending money on information technology again. Who will be the winners in the new replacement cycle?

By John Curran, contributor

The forecast was alarming. When Cisco CEO John Chambers announced the networking giant's latest quarterly earnings on Nov. 10, he warned Wall Street that, due in part to cutbacks in spending by budget-strapped governments, sales for the next three months would probably be less than half of what analysts were expecting. Even worse, he slashed the company's full-year revenue projection by about $1 billion. The stock of the tech bellwether immediately plummeted, dragging down the broader sector and the Dow with it.

That was just the latest twist in what has been a roller-coaster ride for tech stocks over the past couple of years. And the news raised questions about whether the long-delayed rebound in tech spending -- which appeared to have momentum earlier this year -- is sputtering. But for investors willing to weather some volatility, say tech analysts, the pullback in tech stocks is an opportunity. Over the longer term, they believe, increased tech spending is a real and powerful trend.

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