Investors eager to gauge the temperature of the technology sector have received mixed signals.

A shock profit warning from IBM was quickly followed by an upbeat statement from its competitor Compaq.

The revised forecasts come just ahead of the reporting season when US companies tell investors how they fared during the January to March period.

Analysts are especially concerned to assess when the ailing technology sector will recover.

This year - or next?

Corporate spending on technology has been dismal for the past year due to the economic downturn, hampering profits at most technology companies and denting computer sales.

Many companies have been predicting a modest recovery in the second half of this year.

But industry research group Gartner Dataquest said two weeks ago that technology spending by large European companies would not really pick up before the second half of 2003.

Gartner predicted growth of about 4-5% during 2002, half of the ten-year average.

Gloom

But the news from IBM made it clear that companies have not yet started spending again, investors said.

"IBM's news implies that the strength of the US recovery is weaker than the markets had thought," said one Paris-based trader.

It was the first time since June 1991 that the leading US computer maker had warned that its figures would disappoint.

"IBM is so involved in so many aspects of technology. This is not good for the technology sector," said Okumus Capital president Ahmet Okumus.

Consolidation hopes

Compaq's promise that it will meet or beat its profit and sales estimates during the first three months of the year follows a similar announcement from number one computer maker, Dell.

Compaq said it had retained its market share, despite claims from competitors that ongoing takeover negotiations with Hewlett-Packard had confused customers and encouraged defections to rival computer makers.

Compaq's US rival Sun Microsystems said last week that it, as well as peers Dell and IBM, stand to benefit from the integration of Compaq and HP.

The result of the shareholder vote to give the merger the green light is still not known.