"We believe that the recent relative strength of tech stocks is the start of a longer term trend, not merely a flash in the pan," says Jim Oberweis and Dave Covas.

In The Oberweis Report, the money managers and small cap advisors explain, "Our confidence stems from the emergence of the next Killer Apps, which drive technology cycles because they change how we live our lives." Here, they make a case for technology and offer a trio of small cap favorites.

"During the 1980's and early 1990's, the personal computer was the Killer App. During the late 1990's, it was the Internet. During this decade – zilch. Until now. The next Killer Apps – video-on-demand and ubiquitous high-speed wireless connectivity – are coming.

Strong results for Intel (NASDAQ: INTC) came as a surprise to Wall Street; not to tech sector specialist Paul McWilliams, who has been adamant in his forecast that the company would exceed expectations.

In his Next Inning newsletter, designed for the tech-savvy investor. the advisor suggests that the story behind Intel's success is very simple and can be summed up in the expression "x86 everywhere." Here's his assessment.

"To a great extent, Intel's Q2 report proves that Wall Street wasn't only wrong about INTC, but wrong in a big way as to how the tech industry has managed the sharp downturn that unfolded during the last nine or so months.

"While The Street expected tech companies to react as they have in the past by adapting too slowly and stuffing supply channels with tons of inventory, tech companies demonstrated they learned lessons in 2001- 2002 and immediately clamped the supply lines and held back production while channel inventory was digested.

"Microsoft Corporation (NASDAQ: MSFT), already a holding on our buy list, was added to Goldman Sachs' Conviction Buy List," says Bill Martin. In BullMarket.com, he offers the reasoning for his continued buy rating.

"Analyst Sarah Friar at Goldman recently raised her price target on the name to $29 from $25 saying, 'We are adding Microsoft to our Conviction List as we think the combination of better revenue drivers, improved expense management, and sizable cash balances provides more opportunities for bottom-line beats.'

"'Windows 7, Windows Server 2008 R2, Bing, Xbox 360 and new Halo content, Office 2010, and the Azure Cloud provide renewed innovation beyond anything we have seen in multiple years,' Friar wrote.

"We screened our database for standouts based on meaningful profit surprises," says quantitative analyst Richard Moroney.

In Upside, a service focused on applying in-depth quantitative analysis to small to mid-cap growth companies, he looks at a trio of stocks earning his "Best Buy" rating -- Priceline (NASDAQ: PCLN), Sybase (NYSE: SY), and Synaptics (NASDAQ: SYNA).

"All things equal, the better a stock's earnings momentum and profit outlook, the more likely it is to outperform in the year ahead.

"We are still finding attractively valued growers in tech," says quantitative analyst Richard Morney.

In his Upside stock advisory newsletter, he notes "We have found several especially promising tech stocks with solid track records, strong finances, and attractive growth prospects."

Here, the advisor reviews three stocks that earn his top 'best buy' rating: Akamai NASDAQ: AKAM), Synaptics (NASDAQ: SYNA) and TeleCommunications Systems (NASDAQ: TSYS).

"I now believe some bargains are developing among technology stocks," says growth stock expert Mark Skousen. In his specialized trading service, The Turnaround Trader, he adds, "Motorola (NYSE: MOT) is a fallen tech leader that may even rise in a bear market -- and has a chance to double or triple once the market turns around."

Skousen expplains, "Technology stocks appear to have bottomed and are moving higher. Motorola, the $8-billion mobile ohone manufacturer, is in the midst of a classic turnaround situation.

"It used to be the cell phone technology leader, having developed the world's first handheld cellular phone and technical standard for high-definition TV. Yet the stock has fallen nearly 70% from its lofty highs of $26 a share two years ago.

"Everyone who wants out has probably already done their selling," says Nate Pile, who sees a "sidways to up' market. In his Nate's Notes, the advisor sees opportunity in a trio of techs.

"My experience with market cycles continues to suggest to me that the odds favor a 'sideways or up' market over the next several months.

"Meanwhile, Apple (NASDAQ: AAPL) is technically still stuck in a trading range, I am very pleased with the leadership it has shown in the market over the past several weeks.

"Though I've long believed Garmin (NASDAQ: GRMN) was easily the best managed firm in the GPS space, it continues to feel the sting from competitive forces," says Paul McWilliams.

Here, the technology stock specialist and editor of Next Inning reviews the company and the prospects for its new entry in the cell phone market -- the nuvifone.

"As you would expect, the nuvifone is very GPS-centric with all sorts of Geo-tagging features for email, SMS and pictures. It also includes an Opera browser and is fully capable of viewing Word, Excel and PowerPoint documents and working with both personal and enterprise email systems.

"While I've not seen one in person yet, what I've heard from those who have and from what I've seen on the GRMN web site, I think the product has potential.

"The key, however, will be how the nuvifone is marketed and how well GRMN does in building an applications store, a factor that I think will be a huge differentiation driver as we move forward in the Smartphone sector.

Want another sign of the slowing economy? How about technology spending.

Forrester Research estimates that purchases of IT goods and services will drop by 3% to $1.66 trillion this year, reversing an 8% gain from last year. That ends seven straight years of gains in IT spending.

"For IT vendor strategists, the global IT market will be a gloomy one in 2009, with prospects of improvement in 2010," said Andrew Bartels, Forrester's principal analyst in a press release. "Unlike in past years, there are no significant growth markets to offset the weak ones."

For tech investors, there is little to cheer about.

• Software products will be an estimated $388 billion in 2009, the same as in 2008;
• Purchases of routers, switches, private branch exchanges (PBXs), videoconferencing equipment, and unified communications equipment will likely fall to around $353 billion in 2009, a 3% decline from $364 billion in 2008;
• Purchases of personal computers, servers, storage devices, and peripherals will slip by approximately 4% to $434 billion in 2009, from $450 billion in 2008;
• Governments and businesses will buy an estimated $484 billion of IT consulting, systems integration, and outsourcing services in 2009, 3 percent less than in 2008.
  

IT budgets are going to be tight as a drum. There is going to be little room for companies to purchase the latest version of a piece of software or hardware that does little to add to its bottom line. CIOs don't want gee-whiz technology when "good enough" technology will do.

What technology purchases will be made will come at a steep price for hardware and software companies in terms of discounts and freebies for things such as software and services.

It is not a good time to be on the sales staff of any technology company.

Adobe Systems (NASDAQ: ADBE), whose tech colleagues include Apple (NASDAQ: AAPL) and Microsoft (NASDAQ: MSFT), reported earnings for Q4 and the full fiscal year on Tuesday after the bell. The market liked what it saw, sending the shares higher by over 12% in the after-hours trading session.

The numbers do look good. On an adjusted basis, Q4 earnings were $0.60 per share, two pennies better than what Wall Street was expecting. It also represented growth of 22%. For the year, adjusted earnings were $2.07 per share, good for a growth rate of over 28%. Revenues for the year took a nice jump of 13%. Unfortunately, revenues for Q4 didn't move much at all, apparently deciding to take a break by remaining flat.

While the quarter and the year looked more than decent for the most part, the question is, where do we go from here? That flat revenue performance for the quarter might be indicative of a tough year ahead. Also, net cash from operations declined 15%. And here's something else I'll throw out at you: even though the market has pepped up as of late, do you think we're out of the woods yet in terms of the economy? I think not.

There was a short blurb about Xerox (NYSE: XRX) in the news on Monday. Management at the company wanted investors to know that it won't be needing to beg for the green stuff. Cash flow from operating activities, existing credit facilities, and a leaner business will carry the technology company through the current difficult period. Xerox gave a wide earnings range for 2009, saying it should book between $1 and $1.25 per share. Analysts are counting on $1.15 per share.

Well, that range makes it kind of difficult to predict how things will turn out in terms of whether the company will beat Wall Street or not; might as well flip a quarter. The more important thing to focus on is that Xerox will be profitable and that it is confident in its liquidity. The stock was up almost 18% at the close yesterday on nice volume. With the recent rally, should you look at Xerox as an investment, or a trade?

Xerox isn't one of my favorite stocks. I have no interest in it on a long-term basis. It just isn't a leading innovator these days, and there are way better alternatives out there if you want a core, long-term holding in the tech sector. Microsoft (NASDAQ: MSFT), Hewlett-Packard (NYSE: HPQ), and Apple (NASDAQ: AAPL) are three names off the top of my head I'd look at first.

I was checking out Applied Materials (NASDAQ: AMAT) today to see how the stock was reacting after its earnings report. At the time I began writing this, the shares were up over 3% to $10.25 per stub; as I was about to send it off to be published, it was up over 5% to $10.49. The market is kidding me, right?

Melly Alazraki reported on the company's data this morning. The $0.20 per share in adjusted earnings booked for the fourth quarter beat expectations by three pennies. Yeah, I know, beating estimates is the big game on Wall Street. And yes, it is a good thing. However, not every earnings-beat is equal. You have to look at each business carefully and evaluate it relative to the macro environment. Applied Materials will be cutting 1,800 jobs. The market likes that, of course, and believes that cost savings will help profits down the line. However, cutting jobs isn't necessarily a sign that a business is about to get stronger; sometimes, it means the opposite. Also, top-line sales declined by double digits, and with bad news coming from Intel Corporation (NASDAQ: INTC), we know that the slowdown is going to get worse. Furthermore, the market drop earlier today is confirming that bad times will be with us for a while.

In that context, I can't see buying Applied Materials. I mean, up 5%? I know the argument -- you've got to start discounting better times and pick up shares when their cheap. Yeah, right. It is true that the market will do that at some point but we're not there yet. Back in August, I wrote about Applied Materials' Q3 numbers. The stock was higher at that point, and it was working off a higher 52-week low. Now, things have turned south on both counts. And I think they could go further south. At a time when even buying Microsoft Corporation (NASDAQ: MSFT) is an exercise in fear-management, I don't think Applied Materials is a tech stock that should be on anyone's list of investment ideas.

Disclosure: I don't own any company mentioned; positions can change at any time.

Oracle (NASDAQ: ORCL) reported earnings (pdf) on Thursday after the market closed. For the first quarter, the software company saw a top-line increase of 18%, with revenues coming in at $5.3 billion. On an adjusted basis, earnings per share grew 32% to $0.29 per share. Oracle beat expectations by 2 cents.

Moving to the statement of cash flows, I see nice growth there as well. Net cash from operations increased almost 20% to $3.2 billion. And the operating margin on an adjusted basis was nothing less than a delight as it went up by 350 basis points. That was a stellar increase, and the press release said that, at 40%, it was a record for the company. As far as I can tell, Oracle is doing a superb job of delivering some solid fundamentals for its shareholders. In fact, in the after-hours session on Thursday following this report, the company's stock traded up by nearly 7%. This morning, it is up 12% in pre-market trade.

I thought management did a great job in the quarter. But broken record that I am, I'll say that, if I had to buy in this sector, I'd probably first think of Microsoft (NASDAQ: MSFT), or maybe even IBM (NYSE: IBM). Consider that both Microsoft and Oracle have traded over the past 52 weeks in, relatively speaking, tight ranges. I'd rather get a quarterly dividend from a quality tech stock in this environment than just put my money down in anticipation of only a capital gain. It's just the way I'm thinking right now.

Disclosure: I don't own any company mentioned; positions can change at any time.

"The decline in the price of Intel (NASDAQ: INTC) is disconcerting, but on balance, not a surprise," says tech guru Paul McWilliams.

Here, in his Next Inning newsletter, the advisor reassesses his forecast for Intel and the tech sector made at the start of the year, and his continued optimism for the stock's future performance.

"In January, I initially concluded that mature global economies were likely going to exhibit slow growth in 2008 and may dip through a recession.

"However, I also had forecast that emerging economies were large enough to where their contributions, even though they would also probably see some slowing in 2008, would keep aggregate growth high enough to avoid any serious worldwide macroeconomic pain.

"My conclusion was that while it is normal to expect spending by governments, businesses, and consumers to follow GDP patterns, there are what I saw then and still see now as good reasons to believe there would be a preference given for tech.

"In other words, my belief was then and still is today that spending on certain tech sectors would hold stronger than normal in the face of aggregate GDP slowing.

This post is part of a report entitled "Six-pack of technology favorites." You can read about the other top tech stock picks here.

"Technically, Oracle (NASDAQ: ORCL) is now set up nicely in a base for a breakout," says Leo Fasciocco, a technical analyst who specializes in stocks breaking out above previous resistance levels.

In his Ticker Tape Digest, the newsletter advisor explains, "ORCL is in a good spot to be accumulated for a breakout, supported by favorable earnings prospects. And as a big cap play, it is most suitable for conservative investors."

"Oracle, based in Redwood City, California, sells a wide range of enterprise software solutions, including databases, middleware, and applications. With annual revenues of $22.4 billion, ORCL is one of the largest software companies. Its updates and product support are the most profitable segment of its operations. It accounts for 46% of revenues.

"The company has an active acquisition program that is a fundamental component of its strategy. ORCL has spent more than $28 billion in acquisitions the last four fiscal years.

"The stock's long-term chart shows a powerful run up to 40 during the 2000 bull market. It then went south with the stock market. It has since been working its way back. Short-term, the stock rallied from 18 to 23 and has formed a cup-and-handle base. That type of pattern is sometimes found with big caps. The stock is now set up nicely in a base for a potential breakout.