Even better, look at gross margins over the past few years to see if they are expanding. Contracting gross margins are a red flag that competition is heating up.
'Some ways to play a stronger technology market:
'Synaptics (NASDAQ: ) makes touchpads and touchscreens for PC’s and smart phones that allow users to control their devices.
'Although Synaptics’ touch screens are not used by Apple, the com-pany has secured design wins for competing smart phones from RIMM, Nokia, and LG. The company grew revenues 28% year-over-year last quarter and had 42% gross margins.
'Starent Networks (NASDAQ: ) manufactures wireless infrastructure equipment used by cell phone providers to deliver high-speed functionality to their customers.
'Starent’s equipment is the backbone that helps wireless networks operate at broadband speeds. The company grew revenues 30% year-over-year last quarter and had 80% gross margins.
'Netlogic Microsystems (NASDAQ: ) designs 'knowledge-based' processors that allow network providers to prioritize network traffic, slowing down low priority traffic like emails and accelerating delivery of high-priority traffic like streaming video.
'Network optimization helps make video-on-demand a reality. The company saw revenues contract last quarter because of the slumping economy but had 69% gross margins. Revenue growth should re-accelerate in the coming quarters.
'As the market emerges from the bear market – which was driven by a commodities and housing bubble – expect market leadership to rotate. We believe technology stocks could be poised to once again lead the way."
