Jan. 16 (Bloomberg) -- Investors are counting on technology companies, the market's biggest laggards this decade, to keep the four-year rally in U.S. stocks going.

Computer, software, and mobile-phone makers will report a 23 percent increase in net income this year, the biggest among the Standard & Poor's 500 Index's 10 industry groups, according to analyst estimates compiled by Bloomberg.

Analysts have raised their projections for information- technology companies since October, while cutting or maintaining them for all other groups, data from Thomson Financial show.

Microsoft Corp.'s introduction of Windows Vista software will lift spending on technology equipment, Pioneer Investments' Andrew Acheson said. Horacio A. Valeiras of Nicholas-Applegate Capital Management expects Apple Inc.'s iPhone mobile phone, announced last week, to boost earnings for component makers.

``Technology certainly has the opportunity to pull the broader market higher,'' said Acheson, who helps oversee $292 billion at Pioneer in Boston and counts Apple among his biggest holdings. ``Spending is going to pick up and clearly that will feed through'' to earnings.

Average earnings growth for S&P 500 companies dropped below 10 percent last quarter for the first time since 2003 as energy profits slumped, according to analysts' estimates. The forecasts show commodity producers, whose shares have led the bull market, will slow the pace of profit increases further in 2007.

Trahan and Bianco

By contrast, earnings for the S&P 500 technology group may surge after increasing 1.2 percent in 2006, estimates compiled by Bloomberg show. Thomson's 2007 figures call for 20 percent growth, 2 percentage points higher than at the start of October.

Strategists Francois Trahan of Bear Stearns & Co. and David Bianco of UBS AG upgraded technology shares last week. Trahan wrote that the stocks were ``reasonably priced relative to the market,'' while Bianco said they will benefit as companies spend more on personal computers and equipment.

The recommendations helped the group rebound after Motorola Inc., the maker of Razr handsets, disappointed investors on Jan. 4 with earnings that trailed estimates. Advanced Micro Devices Inc., the world's second-biggest semiconductor maker, added to concerns last week by saying fourth-quarter profit slipped.

The S&P 500's gauge of technology stocks last week climbed 2.7 percent, exceeding the broader index's 1.5 percent advance.

An earnings report this week from Apple, the maker of the iPod music player, may show whether Motorola's and Advanced Micro's results are signs of an industry slowdown or isolated examples. Most of the S&P 500's companies report in the next three weeks.

`Fastest Earnings Growth'

Symantec Corp., the world's biggest maker of anti-virus software, led technology shares lower today after saying third- quarter profit missed its forecast on lower revenue from maintenance contracts. Intel Corp., the world's largest computer- chip maker, said after the close of regular trading that fourth- quarter net income fell 39 percent.

The Nasdaq Composite Index, which gets 42 percent of its market value from computer-related shares, retreated from a six- year high, losing 0.2 percent to 2497.78.

Technology earnings may boost stock prices in Europe and Asia. Analysts expect the industry's profits to climb 17 percent in Europe this year, based on estimates compiled by FactSet Research Systems Inc. in London. That would be the fourth-highest among 18 groups in the Dow Jones Stoxx 600 Index.

A gauge of computer-related stocks in Europe last week slipped 0.1 percent, while the Stoxx 600 rose 1.7 percent.

Sony Corp., the largest maker of video-game consoles, will give investors a chance to assess whether profits in Asia will live up to expectations. Tokyo-based Sony reports Jan. 30.

Hon Hai, Foxconn

In Asia excluding Japan, technology companies are ``likely to deliver the fastest earnings growth'' in 2007, Manish Nigam, an analyst at Credit Suisse Group in Singapore, wrote last week.

Samsung Electronics Co., the world's largest maker of memory chips, forecast last week that sales will increase this year at the fastest pace in three years, buoyed by demand tied to Microsoft's Vista. The Suwon, South Korea-based company won orders to supply processor chips for Apple's iPhone, according to a report from Friedman, Billings, Ramsey & Co. in New York.

Hon Hai Precision Industry Co., the world's largest maker of contract electronics, and its Foxconn International Holdings Ltd. handset unit climbed after Apple introduced its iPod-based phone. Taipei-based Hon Hai and Shenzhen, China-based Foxconn will produce the iPhone, Macquarie Securities Ltd. said.

Technology stocks are the biggest industry group by market value in Japan, South Korea, and Taiwan.

Apple Earnings

Computer-related shares, which have the largest weighting in the S&P 500 besides financial stocks, have lost 54 percent since the end of 1999 as the so-called Internet bubble burst. The decline is the steepest among the index's 10 groups.

A two-year delay in Microsoft's introduction of Windows Vista has held back the stocks. The new version of the software running 95 percent of the world's personal computers was rolled out by the Redmond, Washington-based company to businesses in November. It will be sold to consumers starting Jan. 30.

Optimism that the iPod-based phone, due in June, will bolster Apple's earnings sent its shares to a record last week. The Cupertino, California-based company will say tomorrow that fiscal first-quarter profit rose to 79 cents a share from 65 cents a year ago, according to the average estimate of analysts surveyed by Bloomberg.

Intel Results

Banc of America Securities LLC this month raised its fourth- quarter earnings estimate for Santa Clara, California-based Intel by a penny to 27 cents a share. Intel today said net income fell to $1.5 billion, or 26 cents a share, from $2.45 billion, or 40 cents a year earlier. The company's sales of $9.7 billion exceeded the average analyst estimate of $9.4 billion.

Any acceleration in technology earnings may be too late to extend a streak of S&P 500 profit growth above 10 percent that has lasted 13 quarters, tied for the longest since 1950.

Growth slowed to 8.1 percent in the October-to-December period as energy profits fell 8.6 percent, data from Bloomberg show. S&P 500 profit expansion is expected to slow to 9 percent for the full year of 2007 from 15 percent in 2006.

Those forecasts may be low if history is any guide. Analysts underestimated profit growth for S&P 500 companies all but once since the current streak began, according to data from Thomson. They forecast growth would be below 10 percent in the first two quarters of 2005.

Energy Profits

Profit growth for energy companies is expected to slow to 1.4 percent this year from 23 percent in 2006 because of falling oil prices. The S&P 500 index of energy stocks more than doubled since the bull market began in October 2002.

Financial firms, which account for almost one-fourth of the S&P 500's value, rose 16 percent in 2006 as Goldman Sachs Group Inc. led the securities industry to a year of record profits.

Earnings growth for the S&P 500's gauge of banks, insurers, and brokers may slow to 5.8 percent in 2007 from 24 percent last year. Money-market rates rose faster than yields on Treasury notes and bonds, making loans less profitable.

`Much Better Performance'

``There are pockets where the earnings are going to be challenged,'' UBS's Bianco said in New York. ``We really need to see some much better performance, both in terms of earnings growth and even just returns, out of the tech sector.''

The need for more capacity to support downloads of video and other data may help spur the most spending on information technology this decade, Bianco said. That would benefit Cisco Systems Inc., the world's largest maker of networking equipment.

Optimism that spending would increase was already supporting computer-related shares in the second half of last year. The technology gauge has posted the biggest gain in the S&P 500 since the index reached its 2006 low on June 13.

``Earnings are going to look great,'' said Tom Wirth, who helps oversee $1.4 billion at Chemung Canal Trust Co. in Elmira, New York. ``But you're going to pay too much for those earnings at a time when they'll peak and you'll get burned again. You're coming too late to the party.''

Some measures suggest technology shares have gotten cheaper compared with the broader market. Computer-related companies in the S&P 500 are valued at 22.5 times estimated earnings, data compiled by Bloomberg show. The ratio is near a level of about 21 reached last year that was the lowest in a decade.

The group is 38 percent more expensive than the S&P 500 based on price-earnings ratios, less than the average for the previous decade. Technology stocks were almost three times as expensive, on average, during the 10-year period.

``There's a lot of talk about technology,'' said Valeiras, who oversees $14 billion as chief investment officer of Nicholas- Applegate in San Diego. ``But I don't think the positions are where they should be yet.''

To contact the reporters on this story: Daniel Hauck in New York at dhauck1@bloomberg.net; Michael Tsang in New York at mtsang1@bloomberg.net.

Last Updated: January 16, 2007 17:00 EST