Hot Technology Stocks Unlikely To Cool Most Analysts Think Home Computers Will Continue To Proliferate

The lengthy run in high-tech stocks, spurred by computer automation overseas and continuing demand for personal computers in the United States, is far from over.

That, in short, was the good news at last week’s annual Hambrecht & Quist technology conference in San Francisco.

Perhaps best of all, this view is widely shared among a number of veteran technology stock watchers.

“Get on the train and enjoy the ride,” says Bruce Lupatkin, H&Q’s director of research. “Just make sure you get on the quality cars.”

The forecast sounds almost too good to be true. Technology stocks, as measured by the H&Q Technology Index, have been strong for four years, the longest stretch ever. They’re already up 18 percent this year and sitting at record highs.

A modest correction may come in August with the introduction of Microsoft Windows 95. That will require upgraded hardware and 32-bit software for top performance and may temporarily slow sales of less exotic wares.

But it will just be a pause, he and others insist, not the traditional summer slowdown. One strong indicator that the boom will continue was the first quarter’s 58 percent earnings increase among technology companies.

“Technology is becoming more pervasive in our lives, whether we use a PC at work or home, own a cellular phone, or have 50 semiconductors in our automobile,” says Chip Morris, portfolio manager of the $1.2 billion T. Rowe Price Science & Technology Fund. “The world is getting more automated, and the inherent demand for technology products is accelerating.”

Demand for personal computers is especially telling. In the first quarter, consumers cut back on buying automobiles, clothing, even food - but not on PCs. According to H&Q, U.S. personal computer sales grew 21 percent in the first quarter, and they’re likely to keep growing at least 15 percent a year indefinitely.

“Home PCs will be like the VCR market 15 years ago,” says Todd Bakar, H&Q’s head of personal computer research. “Increasingly, we’ll see two to three PCs in homes, not just one.”

Technology has undergone a sea change, adds Neil Weintraut, the firm’s director of software research. Until relatively recently, it was an adjunct to business, like an accounting system that details what occurs in the past. But now technology often is a driver of business, enabling companies to focus on the consumer, rather than production, and to build-to-order.

“Much of the talk has been about the technology,” Weintraut says. “But it is the need for automation, rather than technology itself, that makes it so sexy. Automation now lies at the root of business.”