“The five-week drop in U.S. stocks has driven technology company valuations to the lowest level in more than a decade, making them too cheap to pass up for some of the nation’s biggest money managers.
The largest group in the benchmark gauge for American equities lost 7 percent, or about $190 billion in value, since the market peaked on Feb. 18, falling more than any industry outside financials. Computer stocks trade for 9.3 times reported earnings before interest, taxes, depreciation and amortization, 1.3 times the index’s multiple, data compiled by Bloomberg show. The ratio is the smallest since at least 1998.
While signs of a slowing recovery and the initial public offering of LinkedIn Corp. have spurred concern the industry has entered a speculative bubble, the numbers show something different. Profits will rise 35 percent faster than the Standard & Poor’s 500 Index in 2011, and executives are boosting computer and software spending, data from Bank of America Corp. and Bloomberg show.
“We see the best supply-demand trend in technology,” said Michael Sansoterra, a money manager at RidgeWorth Capital Management in Atlanta, which oversees $48.5 billion including Broadcom Corp. and Google Inc. shares. “You can measure it pretty much every way you want and it looks attractive.”
Computer-Industry Earnings
Computer-industry earnings are almost double the level at the peak of the Internet bubble. Profits for technology makers in the S&P 500 totaled $135.6 billion last year, compared with $72.9 billion in 2000, when the S&P 500 Information Technology Index reached an all-time high, according to data compiled by Bloomberg. Bank of America says corporate expenditures on equipment and software will increase 10 percent this year, about four times faster than U.S. gross domestic product.”
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