Internet stocks, as well as the technology sector in general, have begun to post earnings results for the third quarter, and we are pleased to be speaking with Zacks senior technology analyst Steve Biggs, CFA about how things are progressing thus far in his coverage.

What have you seen so far, in terms of results and guidance for the companies you follow?

I would say results overall look pretty good so far. After the second quarter, I think there was some weakness, some misses with some of the companies. But for the most part, they've bounced back, and I would say guidance has been pretty good. Although there's obviously a few outliers, I would say the group as a whole looks pretty strong right now.

What specific companies are you thinking of that have reported so far?

Well, SanDisk (SNDK), for example - a maker of Flash memory - put up very strong numbers, on what has been kind of a weak business environment for them for most of the year. So we're seeing definitely a turnaround in that business as we go into the end of the year. A better supply/demand picture, it looks like pricing and volume is a little bit better than they had expected. So that's certainly helped them out.

Looking at some others, Akamai (AKAM) - provider of Internet bandwidth or content delivery solutions - [had] another strong quarter, and just overall pretty good. Hittite Microwave (HITT) - great quarter, strong business for microwave and millimeter-wave communications components. So pretty much across the board we're seeing, I would say, pretty strong results.

It seemed like, in the first half of this year, that technology in general seemed to lag the market, and then it picked up steam halfway through. Is this how you're seeing it, and is your overall outlook for 2007 pretty much what you had expected it to be earlier this year?

Well, typically the summer is a little weak, and sometimes the second-quarter results can be weak. And I think we saw a drop-off there - maybe a little bit bigger of a drop than I had been expecting or looking for - but it seems to be back on track with the fairly typical seasonal strength into the latter-half of the year. There are a number of reasons for that, but it does seem to be coming to fruition, whether [or not] it is the usual cycle we get.

Holiday season - does this have a positive impact, generally, on tech stocks, chip-makers and such?

The holiday season helps some of the consumer companies. SanDisk is one that does sell into the consumer market a lot, so they definitely show up pretty strong [with a] seasonal pickup towards this time of year.

On the other hand, some of the others do generally have a strong fourth quarter. It's not really driven by holiday demand; it's more driven by end-of-the-year orders, people looking to close deals before the end of the year, stuff that they had budgeted for. Third quarter is actually the end of the fiscal year for the Federal government, so that kind of helps the third quarter, especially for businesses that do a lot of government business.

And then you have people just coming back from vacation. Say for a software company, not a lot of people want to do major software implementations in the middle of the summer because of vacation schedules. So that tends to lead itself towards the stronger late-Q3 and Q4. So a number of different reasons, and all those seem to be in play right now.

Let's talk about a couple of your Buy recommendations. What would you consider [to be] at the top of your list?

Well, I think I mentioned Hittite - a very strong quarter. I do like the stock; they have run-up a bit following their earnings report, just because it was so strong. But I believe they are going to continue to perform well.

SanDisk is another one I mentioned earlier that has performed well, had a pretty solid quarter and looks to be on a positive trend here as the cycle for NAND or Flash memory strengthens. Once we get into 2008, they're going to have new demand drivers for Flash memory, including solid-state disk drives for laptop computers, which we expect to be one of the fastest-growing segments of the market over the next couple years.

I believe that Flash memory will replace hard-disk drives in the number of applications for laptop computers given the lower energy requirements and faster booting and speeds than a hard-disk drive. So there are a lot of good reasons to have Flash memory in a laptop computer, and SanDisk should benefit from that trend.

Steve Biggs, CFA is a senior analyst covering the technology sector for Zacks Equity Research.