Has the long-predicted shakeout in IT stocks finally arrived?
The simple answer is no. After all, the stock market has been sliding, and when markets fall the most highly-rated shares tend to suffer the worst falls.
IT shares had also been overbought. Earlier this year London fund managers suffered from what one analyst called "Anglotechnoanorexiphobia" - the irrational fear of being underweight in technology stocks.
In spite of the recent slide, the index is still showing a 57 per cent gain since the beginning of the year. The fall is mainly down to a few large stocks taking a tumble. Misys - the sector's largest constituent - has dropped by a quarter since early July as investors fretted about its US healthcare software business. Sema, Sage and Computacenter have lost more than 10 per cent of their value. But Logica is down less than 3 per cent while FI Group is up 9 per cent over the period.
What's more, nothing fundamental has changed. Although experts continue to worry about a shortage of skilled staff squeezing profit margins, and a slump in demand after the year 2000, there is no sign of these pressures.
The reporting season, which kicks off with Computacenter on Thursday and continues with Sema, CMG and Logica, should set the tone for the rest of the year.
In spite of the recent fall, it's hard to make a strong case for buying any of the larger IT stocks when most still change hands on forward earnings multiples of 40 or more. But barring any major upsets in the next few weeks, the IT sector should soon resume its relentless climb.