Rob Black's Technology Stock Report

Microsoft (MSFT) is leading a group of technology companies that want to to increase PC usage in the developing world with a new flexible payment program to lower the initial costs of buying a computer. They are hoping that a Pay as you go computer will increase penetration in Brazil, India, Mexico, Russia and China.

A customer would buy a computer loaded with the Windows operating system then purchase prepaid cards or pay a monthly subscription fee at a cost similar to using a computer at a local Internet cafe. When the usage time ticks down, get online or goto a local retailer to buy more minutes. In an effort to replicate the success of prepaid mobile phones in emerging markets, the PC industry aims to expand PC use in countries where consumers must cope with a lower income and limited access to credit. Microsoft's partners include Advanced Micro Devices (AMD), Intel (INTC), Lenovo (LNVGY), and Transmeta (TMTA) and they aim to work with telecommunication firms, banks and retailers in emerging markets.

Microsoft said it did not expect a lawsuit to delay Vista, a new version of its Windows operating system. Last week Symantec (SYMC) sued Microsoft, accusing it of misappropriating trade secrets used in Vista.

UBS upgraded Lucent (LU) to Buy.

ThinkEquity downgraded RSA Security (RSAS) to Accumulate and cut their target to $19.

Caris analyst Susan Kalla, who covers telecom equipment and media stocks, thinks the telecom-equipment companies she covers should increase earnings 16% next year. Yet their valuations are low enough that they carry a PEG of only 1.1, when normally the ratio would be closer to 1.3 or 1.4. She recommends Palm (PALM), Nokia (NOK), Time Warner (TWX) and CBS Corp (CBS). She believes the following stocks should rise at least 20% to 25% in the next 12 months: Cisco (CSCO) and F5 Networks (FFIV). Tellabs (TLAB) and Juniper Networks (JNPR) are also mentioned positively.

Gateway (GTW) CEO Richard Snyder nearly doubled his stake last week by purchasing 50,000 shares on the open market, according to filings with the SEC.