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The biggest risk for investors in technology, with stock prices up a whopping 55 percent this year, is they might be just a little too happy.

All the buzz isn’t without cause: Corporate technology spending could be set to rebound next year, cost-cutting is paying dividends, and dealmaking is back in a big way.

Those good vibrations will be tested next week, when some of the biggest names in technology, including Intel Corp, Google Inc, and IBM, post quarterly earnings.

“Clearly everybody expects beats in the September quarter,” said Broadpoint AmTech analyst Brian Marshall. “People are expecting to see positive business trends unfold and they’re looking for nice optimistic guidance in the December” quarter.

Such outsized expectations could trip up the industry. Reporting earnings that beat forecasts by, say, a penny per share may not keep investors happy, particularly if companies count on cost-cutting rather than revenue growth to get there.

The same goes for a solid, but unspectacular, outlook for the fourth quarter or 2010.

Call it the Blackberry scenario. Last month, the maker of the device, Research In Motion, reported quarterly profit of $1.03 a share, compared with analysts average forecast of $1 a share. But revenue came up short, its outlook disappointed investors, and the stock got crushed, dropping more than 16 percent.

WHITHER REVENUE … OR REVENUE WITHERS?

For the broader industry, one of the main concerns is where revenue growth will be found easy pay day loans. Overall corporate spending on technology is still at much lower levels than last year, and spending in Europe remains a big worry.

Indeed, only a handful of companies are expected to post revenue growth, including Apple Inc, Google, Verizon Communications Inc, and Amazon.com Inc.

Expectations for the technology industry have nonetheless improved over the past three months. In July, analysts expected tech companies to post a 20 percent decline in third-quarter earnings from a year earlier. Now, they expect earnings to slide just 14 percent, according to data from Thomson Reuters.

Stock prices underscore the optimism. The Morgan Stanley Hi-Tech index of major tech stocks is up around 55 percent this year and 19 percent since the beginning of July. While the Standard & Poor’s 500 has kept pace over the past three months, it is still up a more modest 18 percent this year.

Most likely, only hefty earnings beats or rosy forecasts will keep that sort of momentum going, analysts said.

Along with quarterly earnings, investors will be keen to hear any commentary on consumer demand ahead of the holidays and about a hardware refresh cycle by businesses that is expected to begin next year.

Helped by healthier consumer spending, global semiconductor sales rose 5 percent in August from July. That marked a sixth consecutive month of sequential growth. 

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The European Central Bank kept its interest rates at a record-low 1.0 percent on Thursday and its head Jean-Claude Trichet is expected to caution against hopes of a speedy economic recovery.

The decision met analyst expectations — all 82 economists in a Reuters poll had expected interest rates to stay on hold in October for the fifth month running, with most expecting them to stay unchanged until late next year.

“This was no surprise at all,” said Nomura economist Laurent Bilke. “The ECB has signaled there wouldn’t be any additional monetary policy stimulus but that they are not ready for a rate hike yet.”

Financial markets were largely unchanged after the decision.

The Governing Council’s Venice meeting was the second of two held annually outside its Frankfurt base and marks the first anniversary of coordinated rate cuts by major central banks in the aftermath of the Lehman Brothers collapse.

The Reserve Bank of Australia on Tuesday became the first Group of 20 central bank to raise rates after the recession hit.

While most analysts expect the next ECB rate move to be a hike, they forecast that it will not happen before the third quarter of next year. But tighter liquidity conditions may push up market rates before that, futures pricing shows.

The Bank of England also kept its rates on hold on Thursday, as was widely expected quick pay day loan.

Attention now turns to Trichet’s news conference, where he is seen confirming that current policy settings are appropriate. Markets will listen for any clues on the timing and order of the ECB’s exit strategy.

“Current rates are appropriate, that is a key sentence that will probably stay until well into next year,” Bank of America economist Holger Schmieding said.

The ECB is unlikely to detail its exit strategy, just to repeat that it can exit when needed, he added.

Trichet’s comments on how governments should wind back their extra spending and how the ECB will take fiscal exit into account in its monetary policy decisions will also be key.

“They will definitely not do any explicit coordination (between fiscal and monetary exit strategies),” Schmieding said, but added: “There might be actually be a case that if fiscal policy is tightened in 2011, the ECB may take that into account and thus have an indirect impact on its rate policy.”

DOLLAR WEAKNESS

Trichet’s comments on economic recovery will also face close scrutiny. The euro zone economy shrank by a revised 0.2 percent in the second quarter of the year, and analysts expect it to have grown 0.3 percent in the July-September quarter. 

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The nation’s service sector expanded in September for the first time in more than a year, according to a report from a purchasing managers’ group released Monday.

The Institute for Supply Management’s non-manufacturing index rose to 50.9 last month from 48.4 in August. Economists surveyed by Briefing.com had expected a reading of 50, which is the point at which the index reflects expansion.

It was the second consecutive month of improvement in the index, which last indicated expansion in August 2008.

The services sector, which includes businesses such as banks, airlines and restaurants, makes up the bulk of economic activity in the United States.

The ISM’s new orders index, which measures requests for services such as construction labor, rose 4.3 points to 54.2. The business activity index added 3.8 points to 55.1 last month.

Both measures are now at their highest levels since before the recession began, according to Tim Quinlan, an economic analyst at Wells Fargo.

Those gains "suggest that businesses outside of manufacturing are transitioning from recession to recovery," Quinlan wrote in a research report.

The index that measures employment in the sector edged up less than one point to 44.3, but it remains well below the level indicating job growth in the sector.

"Jobs are still a major concern," said Ryan Sweet, senior economist at Moody’s Economy.com. "The employment index is weak and points toward a very slow improvement in the labor market."

Still, the larger-than-expected rise in the overall number could mean that U.S. gross domestic product will come in at a 3% annual rate of growth during the third quarter, according to Sweet.

Prices paid by service sector firms fell sharply in September. The prices index sank 14.3 points to 48.8, indicating a significant reversal and decrease in prices paid from August, according to the report.

The ISM said 15 of the 18 service sectors in the survey expect to derive some benefit from the government’s economic stabilization program.  

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A U.S.-led group that includes former Ford Motor Co director Michael Dingman is in talks to acquire the automaker’s money-losing Volvo brand, a source familiar with the matter said on Monday.

The group, called the Crown consortium, has been in talks with Ford over Volvo for some time, said the source, who asked not to be named because the discussions are private.

The discussions raise a potential rival bid for Volvo to that of China’s Geely Automotive, which confirmed in September an interest in the Swedish brand.

Ford, the only large U.S. automaker not to restructure under a government-supported bankruptcy this year, in December said it was considering selling Volvo. The automaker has been divesting brands to focus on Ford, Mercury and Lincoln and conserving cash to support a turnaround.

A Ford spokesman said the automaker was in discussions with parties interested in acquiring Volvo. He declined to identify the parties or to comment on the potential timing of any sale.

“We will provide an update as soon as we have something to say,” Ford spokesman Mark Truby said.

The Financial Times first reported the Crown consortium’s interest in the Volvo brand and said the group was fronted by Dingman and former Ford and Chrysler executive Shamel Rushwin.

Dingman served on Ford’s board from 1981 to 2002, when he reached its mandatory retirement age.

The FT said the consortium had fully secured financing from U.S. private equity groups and was seeking additional backing from Swedish investors to signal its intent to keep Volvo in the country, citing people close to the sale.

The FT reported another informed person as saying the U.S. consortium had offered significantly less than Hong Kong-listed Geely, but that both plans involved similar plans for more than $3 billion of additional investment in Volvo.

The FT quoted a person close to the sale as saying Geely had offered just less than $2 billion for Volvo. Other media reports have put the price tag at about $2.5 billion.

The timing of the sale remains unclear. Ford has been restructuring Volvo to cut costs and to separate its operations to run on a stand-alone basis. It started discussions on the sale of Volvo in the first quarter of this year.

The unit was designated as held for sale during the first quarter, meaning that Ford expected to sell it within a year, but the process has moved at a deliberate pace.

Volvo is the last brand left at Ford from the automaker’s former premier auto group. Ford previously sold off Aston Martin, Jaguar and Land Rover, but has continuing relationships with each brand and likely would retain ties to Volvo also.

The process of separating Jaguar and Land Rover from Ford for the sale to Tata Motors required working out continuing relationships that may be even more extensive between Ford and any new owner of Volvo.

As a result, Ford’s interests run beyond transaction price to the long-term financial stability of Volvo. 

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Global finance chiefs made little headway on Sunday in overcoming long-standing disagreements over how much power rich nations should cede to major developing countries at the International Monetary Fund.

The IMF’s 186 member countries, however, did find some common ground, agreeing the institution should develop a set of principles by April to guide nations as they get ready to pull back on extraordinary recession-battling measures.

“We’re not out of the woods but we’re well on our way,” said Youssef Boutros-Ghali, Egypt’s finance minister and chair of the IMF’s policy-steering committee. “Exit strategies are being discussed but they are nowhere near being implemented now until we firm up the recovery in the world economy.”

The IMF, which has committed about $175 billion in loans to countries around the world this year, says it will need more resources if it is to oversee the recovery of the global economy and help prevent future crises.

But this depends on giving emerging market economies a greater say. If a member’s voting share is increased, they are required to increase how much money they provide the Fund.

IMF members aim to conclude talks on voting power by January 2011.

“The task of realigning quota shares with current global realities remains politically vexing,” the IMF’s board said in a report weighing in on the issue at the Fund’s semiannual meeting here.

While the steering committee supported an agreement struck just more than a week ago by the Group of 20 nations to shift at least 5 percent of the IMF’s voting power to developing economies, emerging powers said it was not enough pay day loans.

Major emerging economies are demanding the developed world shift no less than 7 percent of its share to growing powers, like China.

“We can only hope that over-represented advanced countries will realize that they may do great harm to the Fund if they attempt to block or delay quota and voice reform,” Brazilian Finance Minister Guido Mantega told the meeting.

He said the Fund needed to change so it could “cease to be regarded as mainly an American-European institution.”

The demand for a 7 percent shift is meeting resistance from the developed world, particularly European nations, which do not want to give up too much of their own power.

Finance Minister Anders Borg of Sweden, which currently holds the European Union presidency, warned that Europe could become less generous in its financial support of the Fund if it lost influence over it.

“Adequate participation in the decision-making process … is a prerequisite for our taxpayers’ continued support of large financial contributions,” he said.

GROWING DEMAND 

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Pipeline giant Enbridge Inc. is pushing further into the renewable-energy market, announcing today a plan to purchase the largest solar power farm in Canada from U.S. solar manufacturer First Solar Inc.

Enbridge, the country’s biggest distributor of natural gas, said it will spend $100 million this year on its solar strategy, and expects its newly acquired Sarnia Solar Project to be fully operational by the end of this year.

"The Sarnia Solar Project is right in the sweet spot of Enbridge’s renewable energy strategy," said Enbridge president and chief executive officer Patrick Daniel. "It has risk and return characteristics which are fully consistent with Enbridge’s low-risk business model, and similar to our crude oil pipeline business."

The projects were originally owned by California solar manufacturer OptiSolar Inc., which had obtained 20-year contracts with the Ontario Power Authority to sell its solar electricity into the provincial grid for 42 cents per kilowatt-hour.

Those contracts were obtained under an older renewable-energy standard offer program (RESOP), which has since been replaced with a new feed-in tariff (FIT) program launched last month.

But OptiSolar ran into trouble during the economic downturn, so in April sold the rights to its Ontario solar projects to Tempe, Ariz.-based First Solar empire payday loans. Since then, First Solar has built more than 65 per cent of the 20-megawatt project, which on sunny days can put out enough power to meet the needs of 3,200 homes.

On average, the Sarnia Solar Project will produce 30 million kilowatt-hours annually, equating to revenues of $12.6 million a year for Enbridge. The company already owns four wind-energy projects in Canada totaling 260 megawatts, including a 190-megawatt wind farm in Bruce County.

"Subject to certain conditions, Enbridge may participate with First Solar in future solar energy projects at the Sarnia site," the company said.

First Solar will continue to supply its thin-film solar modules to the Sarnia Solar Project. The RESOP program, unlike the new FIT program, does not have local content rules that make it difficult to use foreign-made solar equipment.

Enbridge won’t be alone in owning a massive solar farm in Ontario. Toronto-based SkyPower Corp. and joint-venture partner SunEdison LLC from Maryland have completed a 9-megawatt project near the town of Stone Mills. It is the first phase of a 19-megawatt solar farm called First Light.

Several other multi-megawatts solar farms in Ontario are under construction or in early development.

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Chrysler Group LLC still plans to shutter eight North American plants according to its initial schedule, Chief Executive Sergio Marchionne said on Thursday, as he dismissed recent reports that a Detroit-area plant would get a reprieve.

Marchionne, who is also the head of the Italian carmaker Fiat SpA, said the No. 3 U.S. automaker will stay with business decisions it made at the time of its April 30 bankruptcy filing, and would advise the U.S. autos task force of its updated turnaround plan.

Under its previously announced restructuring plan, Chrysler said it would close eight auto plants in North America, aimed at steering the faltering automaker toward recovery.

In the past week, reports have said that Chrysler’s Sterling Heights, Michigan plant slated for closure at the end of 2010 would remain open until at least 2012 as the company revamped the two sedans made there — the Chrysler Sebring and the Dodge Avenger.

“There are no plans on my desk that the decision is going to be reversed,” Marchionne told reporters at an appearance at Chrysler’s global headquarters.

Chrysler is offering an update to the White House’s autos task force this week, a U.S. Treasury official said on Tuesday.

“I think we are going to advise them of the fact, that, based on the current assessment of conditions, there is absolutely no need today to go up there and revisit that decision,” said Marchionne.

“And, if and when that need were to arise, then we will look at this as part of a wider set of choices that may or may not include Sterling Heights.”

Marchionne said Chrysler is working on the final details of a five-year turnaround plan to be unveiled in November. The company emerged from bankruptcy on June 10 by selling most of its assets to a group led by Fiat, which took a 20-percent ownership stake in Chrysler and full management control.

Marchionne said Chrysler is in a “cleansing process” similar to one that he led in 2004 when he started a successful turnaround of Fiat, and Chrysler’s weak September sales results do not reflect the true viability of the company.

Chrysler on Thursday reported a 64-percent plunge in September U.S. sales, compared to a year earlier.

He said a combination of factors including the end of the U.S. “cash for clunkers” buyer-incentive program and reduced incentive spending led to depressed sales figures for September.

“We are not bleeding like people think we are,” Marchionne said.

“The future (for Chrysler) is going to be a lot better” than what last month’s sales figures would indicate, he said.

After the “cleansing process” that includes an emphasis on cutting costs, Marchionne said “We need to go back and make products that people want.” 

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