"Corporate spending may not rebound in 2003,
but some companies, like Dell and Nokia, are poised to excel."

Expect a desultory 2003 for the technology industry. Businesses will begin to extract more productivity gains from technology, but the hardware and software industries will not benefit accordingly. Corporate customers drive most tech spending, and they will still be thinking more about getting value out of what they've already got than spending money on new stuff. With sales growth anemic, only the strong vendors will survive. Consolidation, especially in software, will be a major trend of 2003. The recent purchases of Rational Software by IBM and Precise Software Solutions by Veritas are the tip of the iceberg. Expect also more acquisitions by cash-rich Microsoft.

Given that dismal picture, if you measure the health of technology in our society by the performance of its industry's stocks, plan to be disappointed. Technology stocks remain, in general, too expensive. A recent study by Goldman Sachs found that the average ratio of price to earnings for technology stocks is now about twice the ratio for the S&P 500 as a whole. Such relative levels were unheard-of before the tech stock bubble at century's-end. The maximum pre-bubble relative multiple was about 1.4. And today's highs come, as the study points out, "at a time when the ability of tech earnings to outperform is arguably the lowest in the last decade."

All is not grim, however. Here are a few companies I expect will do well in 2003:

AMD: continues to challenge Intel with well-conceived designs for PC microprocessors. BEA Systems: middleware for enterprise software widely regarded as the best, despite vigorous competition from IBM. Borland: multi-platform application development tools are perfectly positioned. Dell: taking market share in every area of standardized hardware, including storage and networking. Logitech: unstoppable maker of consumer PC peripherals. Mercury Interactive: software performance measurement extracts value from what companies already have. Nokia: cellphones are hot and this remains the undisputed leader. Salesforce.com: its Net-delivered sales automation is defining a new approach. Expect an IPO this year. Veritas: storage software for the multi-platform future.

As for tech's two largest players, it will be a year of re-emergence. Hewlett-Packard CEO Carly Fiorina's reputation will improve as the successful integration of Compaq becomes more apparent. At IBM, new CEO Sam Palmisano finally gets a chance to show us whether the $80 billion colossus can grow, now that Lou Gerstner - that apostle of retrenchment and stock buybacks - has retired as chairman.

One sector to watch closely is business intelligence software. Customers have to understand the meaning of all the data their technology is spitting out. It's even more important now as companies seek to get value from what they've already bought. Software-makers Cognos and Business Objects will both continue to perform impressively. Another important player, data warehouse vendor Teradata, may finally split from parent NCR and emerge into the sunlight.

Another healthy sector will surely be wireless--WiFi connections to the Net for PCs, and growing enthusiasm for using the cellular phone network as a way to send e-mail, pictures, and other forms of data. Intel's new wireless-enabled chips for laptops should be a big hit.

And even though companies remain packed to the gills with hardware and software acquired in the frenzy of the late '90s, 2003 should also see the clear beginnings of a major replacement cycle for PCs, simply because the old ones, many bought as companies prepared for Y2K, are antiquated and wearing out. That's great for Intel and Microsoft, as well as their whole vast related business ecosystem. But unless the economy revives significantly, it won't be enough to pull the tech industry overall into a healthy new cycle of buying.

Instead, China will remain the best growth opportunity for almost every tech player. India, too, will gain visibility, but as a software power, not a major end-market -- yet. I continue to see great promise as the sights of tech's marketers turn to the vast developing world. If companies can make products that help poor people raise their productivity and standard of living, they will be able to pay.

It all means 2003 won't be boring, that's for sure. So have a happy New Year. And by the way, let's all pray for peace.