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Warnings Parade Continues

Another day, another round of earnings warnings from leading technology companies.

Sun Microsystems issued a dismal outlook last night, and analysts are slashing estimates on the company by almost 50% this morning. SUNW is down more than 10% in pre-market trading to a new 52-week low.

And Corning is also down in the pre-market after saying that 2001 fiber optic growth will be well below the 15% it had previously forecast, and analysts are slashing estimates there too.

With those lowered estimates, SUNW is now trading at 70 times 2002 estimates, and Corning is trading at about 40 times 2002 estimates. The depression in technology earnings is keeping these companies overvalued even as share prices slip into the low teens. Don't be surprised to see Sun trading in the single digits by the time the great Nasdaq bear is finally over.

Throw in signs that consumers have stopped spending (personal income rose 0.5% last month, while spending rose only 0.1%), a negative reaction to a 25-basis point rate cut by the European Central Bank, more European antitrust threats against Microsoft , and you have the makings for yet another down day in the market. The Michigan consumer sentiment survey tomorrow morning is about the last hope for a rally this week.

But we're not going to leave you completely without good news this morning. There's a reasonably valued technology company out there that beat earnings estimates and raised forward guidance last night. Never thought I'd type those words again.

However, before you get too excited, Tech Data beat those lowered estimates almost entirely through lower than expected interest expense on debt reduction.

But in this market, that's good enough news to send the company's stock about 10% higher, to around 36 in pre-market trading.

Tech Data is cheap, trading at 17 times this year's estimates and 13 times next year's estimates, roughly in line with its long-term projected growth rate of 18%. Its strong balance sheet is a rarity these days.

TECD may not be very exciting, but the IT reseller and services firm could very well outperform other leading tech stocks over the long run at this level. As long as the stock can stay above its 50-day moving average, which it should clear at 34.93 on this morning's opening, it looks like a relatively safe technology play. And we assume safety is back in style at this point.