Merrill ups tech hardware rating

NEW YORK: Merrill Lynch said it raised its rating of the computer component and manufacturing supply chain and computer hardware sectors to "overweight" from "equal weight."

Merrill also cut its rating of the semiconductor and Internet sectors to "equal weight" from "overweight."

"Price momentum remains one of the worst among all sectors," Steven Milunovich, analyst at Merrill Lynch in his research report about the semiconductor sector. He added that semiconductor companies had failed to deliver the kinds of positive earnings surprises that can propel stocks higher.

The Internet sector was downgraded for similar reasons.

Referring to the computer hardware sector that includes companies ranging from IBM to HP to Sun, Milunovich said earnings improvements were relatively better than most other technology sectors.

Merrill updates sector rankings on a quarterly basis according to its quantitative TechStrat Sector Model that has some fundamental, technical and statistical indicators.

Merrill also ranked top 120 technology stocks using a quantitative model. Analysts at Merrill do not cover all 120 companies.

Companies in the top 25 percent of the list that Merrill analysts have "buy" ratings include Apple Computer Inc., Affiliated Computer Services Inc., Computer Associates International Inc., McAfee Inc., Microsoft Corp., Molex Inc., Qualcomm Inc. and Research In Motion Ltd..