09 February 2012 at 11:15 GMT
Approximately 29% of North American technology companies have released Q4 results, and the sector in general posted strong growth in earnings and revenues, with a great preponderance of positive surprises.
The surprises and the strong growth came mostly from the hardware subsector, led by Apple’s large 1Q surprise. Other hardware surprises came from the hard drive and computer component subsectors that were hard hit by the Thai flooding in the summer 2011, but have rebounded as of late.
Over the past 10 years, the US technology sector has hovered around a P/E of around 20x and a Price/Cashflow close to 15x. But right now it is close to its 10-year lows on both measures. The earnings surprise factor might finally be the catalyst for the sector to trend higher again. 
What’s next? Companies like Hewlett Packard and Dell, which have not been able to grow at the same rate as in the past, could be potential candidates to support the depressed hardware subsector. Dell’s large cash balance of USD 14bn (43% of the market cap.) and HP’s strong management and balance sheet might serve as a floor for these stocks.