The majority of acquisition targets have been poorly performing companies that are near long-term lows in market capitalization, such as EDS, ChoicePoint (CPS), Yahoo (YHOO), 3Com (COMS), meaning the acquirer (or hopeful) acquirer must have confidence in the business environment going forward.

Has earnings season in tech gone pretty much as expected, or have there been some noteworthy surprises?

The big surprise is how strong results have been. With many people looking for signs of an economic slowdown, most companies with a March quarter end have posted very strong results. I would say that the economy in the first quarter was much stronger than we thought. As a result, the market has rallied over the past month. Companies with an April quarter-end have begun to report and some of the results are not so positive, meaning that things could be slowing down, but it took until March for it to happen.

However, that has only been a few data points, with many large companies yet to report April quarters. I am still somewhat cautious in spite of strong results thus far, as we could still see slower IT spending.

Which stocks under coverage are your top Buy recommendations at this time?

I continue to like IBM (IBM) as a defensive technology play. They get more than
half their revenue from overseas, insulating the company in the event of a domestic slowdown, and they could benefit from any disruptions at HP as it integrates EDS.

I also still like long-term buys Hittite Microwave (HITT) and Salesforce.com (CRM). Hittite is broadly diversified with good international exposure and sells into some defensive markets. Salesforce.com has a strong product cycle with new applications and its subscription model requires little up-front commitment from customers, which is an easier sell in uncertain times.

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