Do you think that the PC and equipment replacement cycle are not anticipated in earnings projections? Of course they are. Here's the kicker though. There is so much spare equipment on the market that companies are basically self-insuring. Why by a new Cisco router when you can buy one on E-bay from a dot-bomb for 1/3 the cost? Also, have you noticed the PC price war? What does it mean when the anticipated volume is replaced but at lower revenues? Oh, and one more thing, do you think the tightening of the screws in capital expenditures by companies that don't want to spend any cash will impact the three year replacement cycle?
Sure they are. The difference today is that the market is still filled with amateur investors who look backward instead of forward when it comes to pricing stocks.
The thing you have to remember in any information-based industry is that the cost of increasing productivity is very low. Compared to an industrial producer, the cost of increasing productivity is so low it almost hurts (compare, for example, the cost of doubling the speed of all your company's computers to the cost of doubling the productivity of an auto manufacturing plant). The "price wars" that you see are simply the natural result of maturing technologies with multiple manufacturers. Most of the money that is made in an industry is made when the technology is so innovative that nobody else has it. In that regard, you have to remember that the top "high-tech" stocks of 2003 may involve a bunch of products and even entire companies that don't exist now.
As economist Larry Kudlow might say: Have faith in the supply side -- have faith!