Is it time to dust off the party hats?

From the cheery headlines accompanying the latest round of tech earnings, you’d think so. Google (GOOG) CEO Eric Schmidt declared last week that, “the worst of the recession is behind us.” IBM (IBM) actually boosted earnings targets for the year. Taken along with the stimulus potential of Windows 7, Microsoft’s (MSFT) critically acclaimed PC operating system that launches this week, some say happy times are here again.

Not so fast. As we head into week two of this round of tech earnings, it’s important to keep in mind what these numbers show, and what they don’t. More

Computer makers hope that stylish new laptops like Hewlett-Packard's Pavilion dm3 will lure shoppers away from low-cost netbooks. Photo: HP.

There’s going to be a PC retail showdown this holiday season. Let’s call it the netbook vs. the nymph.

In the netbook corner: the cheap, small, underpowered laptops that are all the rage lately. Asian manufacturers like Asus first introduced them, and consumers love them because they handle documents, e-mail, and web surfing for as little as $300. The big PC makers offer their own models, but also secretly hate that netbook fever is sucking the profits out of the industry.

In the nymph corner: a newer class of svelte yet powerful laptops that could steal some attention from netbooks. (The industry calls them “thin and light,” but hey — nymph is more fun.) Like their competition, nymphs are slim — some of them less than an inch thick — and they often eschew extras like DVD drives for the sake of portability. Perhaps best of all, they do a solid job running Microsoft’s eagerly anticipated Windows 7 operating system, which arrives next month. More

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Microsoft's follow-on to Vista, Windows 7, is getting closer to launch. Guess what? The buzz is better than you might expect. (MSFT) (HPQ) (DELL) (AAPL) (INTC) (AMD)

Cisco CEO John Chambers needs to try new things to keep his company growing while corporate technology budgets shrink.

It is the buzz of the tech world: Cisco Systems may soon try selling servers, those heavy-duty computers that companies use to run critical back-office applications. The prospect of router giant Cisco's entering the already crowded $55-billion-a-year server market is intriguing (imagine if LeBron James decided to try his hand at football) but also has the potential to disappoint. (Remember Michael Jordan's ill-fated effort to play professional baseball?)

With his server gambit, Cisco (CSCO, Fortune 500) CEO John Chambers appears to be targeting a very specific niche: the trendy "virtualization" segment of the server business, which is expected to grow 43% this year to $2.7 billion worldwide, according to research from Gartner. Virtualization basically is a way to make servers more efficient. Using specialized software, one computer with a hard drive and a network connection can act like several smaller computers and hard drives on different networks. When everything goes right, more work gets done with less hardware and electricity. Multiply that effect in a data center with thousands of servers, and you can see why corporate customers like it, especially in times of cutting costs. Computer maker Dell (DELL, Fortune 500), for example, believes it can cut its information technology budget 10% this year without sacrificing productivity.

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The world's two largest creators of computer chips are cooking something up together.

On Monday morning, there will be a chip industry summit of sorts: Intel, the world's largest chipmaker, and Taiwan Semiconductor Manufacturing Company, the world's largest chip foundry, will make a strategic announcement at Intel headquarters in Santa Clara. According to Intel (INTC) PR, the execs on hand will be Intel mobility chief Anand Chandrashekar and sales chief Sean Maloney, and TSMC (TSM) CEO Rick Tsai and sales chief Jason Chen.

What are they up to?

They're not saying – but it's not unusual for the two to cooperate. They've been known to work together on setting industry manufacturing standards. Two years ago they announced that TSMC would make WiMax chips for Intel. Intel has also been known to outsource the production of some chipsets and other items that don't require the very latest manufacturing processes. (The companies share more than WiMax chips; Chen ran sales for Intel before he joined TSMC four years ago.)

They're also competitors. TSMC makes chips for a bevy of Intel competitors including Nvidia (NVDA) and Qualcomm (QCOM).

Given that Chandrashekar and Maloney are attending for Intel, I'm guessing this announcement might focus on mobile and WiMax-type efforts. But considering the tough times in the chip industry – Gartner yesterday said it expects chip sales to plummet by up to a third in 2009 – lots of things could be on the table.

Whatever the deal is, it's probably something TSMC needs more desperately than Intel does. With its smaller chip customers swooning, one has to imagine Tsai might cut Intel a pretty sweet deal to get any business the chip giant would like to send his way. (NVDA) (AMD) (QCOM) (AAPL) (IBM)

Preston Feight, chief engineer, uses cloud computing to redesign Kenworth trucks without making huge investments in technology.

Most people don't spend much time thinking about mudflaps – those strips of rubber behind a big rig's wheels that repel grime and maybe show a gun-toting Yosemite Sam, warning "Back off!" But by using sophisticated design technology, engineers at truckmaker Kenworth discovered that the little flaps were also a major source of drag. Simply trimming and tapering the flaps will cut about $400 from a typical truck's annual gas bill.

How exactly did Kenworth solve its mudflap quandary? The company, a unit of $15-billion-a-year truck conglomerate Paccar, took advantage of cloud computing. In Kenworth's case, engineers rented time on a supercomputer thousands of miles away; that system helped employees root out assorted gas-guzzling design flaws they might have missed had they relied just on computers at Kenworth's facilities outside Seattle.

Indeed, the engineers used rented computing gear to produce the T660, an aerodynamic truck released in 2007 that ditched the typical bulldog look for a more dolphin-like snout and can get roughly seven miles per gallon. (Don't laugh. That's actually impressive for a semi.)

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Under Otellini, Intel has beaten back competitors and gotten more efficient. Photo: Intel

If you're the CEO of Intel, you don't typically worry about whether the business will make money. In the average day last year, the Silicon Valley giant sold $103 million worth of chips and generated $30 million in cash. Nice work if you can get it, right?

Suddenly, it's not so nice.

Don't look now, but the global economic meltdown is burning a hole in Intel's (INTC) business model. This week CEO Paul Otellini announced that last quarter's profits tumbled 90 percent to $234 million, and reportedly told employees that he couldn't rule out the possibility that Intel might actually lose money in the current quarter – it would be the first time that's happened in more than 20 years. (Intel doesn't comment on its internal communications.)

When things get this bad, investors justifiably ask whether it's time to give the CEO the boot. The answer in Intel's case? Not yet. More

AMD's chips are often found in low-cost PCs, which means executives can't get a true sense of fourth-quarter sales until after Black Friday. Image: AMD

Based on Intel's dramatic sales warning Wednesday, you might expect rival Advanced Micro Devices to just crawl into a hole and die. If the economic mess is tripping up the most powerful chip company on the planet, how could its underdog challenger stand a chance?

Indeed, investors think that when Intel (INTC) sneezes, AMD (AMD) gets the flu. After Intel predicted fourth quarter sales will come in about $1.5 billion below its previous forecast, AMD shares plunged as much as 9% in midday trading Thursday before a broad market rally sent shares up 5% for the day. Intel shares, by way of comparison, were down only 5% midday and finished up up nearly 7%. More