At first blush, there’s not much to get excited about when it comes to global technology stocks.

Worldwide spending on information technology is expected to increase by a modest 6.3% annually until 2010, when it will reach $1.48 trillion (all figures in U.S. dollars) compared with $1.16 trillion in 2006, according to Framingham, Mass.-based consulting group International Data Corp.

IDC expects sales of software to jump the fastest — by 7.7% annually, to $327 billion by 2010 — while spending on technology hardware and IT services will increase by less than 6% per year over the same period.

Nevertheless, there are plenty of technology niches in which investors can find both rapid growth and companies that are exploiting it.

Investment Executive analysed more than 100 tech companies based outside Canada and the U.S., then focused on those with the strongest percentage of “buy” recommendations.

The 10 companies selected offer a rich mix of technologies and geographies. Most concentrate on making and pumping out prodigious quantities of chips, sub-systems, modules, memory devices and power cells — the bits and pieces that go into computers, communications networks and consumer gadgets.

Four members of this group are based in Taiwan or China, two are based in Israel, two are based in Europe, and there is one each from India and the Cayman Islands.

All must be considered relatively risky investments. Even the larger companies — Taiwan Semiconductor Manufacturing Co. of Taiwan and Qimonda AG of Munich, Germany — are hardly blue-chip. They make semiconductors for the notoriously cyclical computer and consumer electronics industries.

There is also currency risk to consider. Although all 10 stocks trade on exchanges in the U.S., most do so through American depositary receipts, which reflect currency shifts. Not only that, but most of the companies either are based in emerging markets or do much of their business there.

However, what most members in this group of 10 can offer is the prospect of sharp growth — through the strategy of intense focus on a promising niche.

Consider Jiangsu, China-based Suntech Power Holdings Co. , which went public in December 2005 at $15 per ADR on the New York Stock Exchange. The company specializes in photovoltaic cells and modules — basic building blocks of the solar energy market. Most of Suntech’s revenue is generated in Germany, Spain and Italy — markets in which government subsidies are stimulating growth.

Suntech is the second-most expensive stock of the group, from a share price/revenue standpoint, with a market value of 9.3 times 2006 revenue. But it is also the fastest-growing company. Reuters Ltd. consensus estimates predict Suntech’s earnings will jump 75.8% this year to $1.16 per share, vs 66¢ per share in 2006. The company’s sales are expected to reach $1.14 billion this year — up almost 90% from $603 million in 2006.

Suntech would have done even better in 2006 had it not purchased a significant portion of its polysilicon wafers — necessary to make solar cells — on the more expensive spot market, notes Jeff Osborne, an analyst for CIBC World Markets Inc. in New York, in his Nov. 20 research report.

But Suntech made the purchases on the spot market in order to secure market-share gains, leading Osborne to note the firm “is making tough strategic decisions that are positioning it to be a dominant player in the longer run in the solar market at the expense of short-term results.”

As a result, Suntech’s expenses will drop this year as it puts in place longer-term supply arrangements for its wafers, Osborne suggests.

When Osborne’s report was released, Suntech ADRs were trading at $27.75. But by Jan. 30, the price had jumped 37% to $37.94, making his 12- to 18-month target price of $40 now seem pessimistic. Suntech is expected to report its fourth-quarter numbers on Feb. 13.

Investors should also consider a pair of firms based in Taiwan — Himax Technologies Inc. , a developer of semiconductors for the flat-panel display market, and Silicon Motion Technology Corp. , which makes semiconductors that consume very little power and are used to run consumer devices such as MP3 players, digital cameras and multimedia phones.

Both firms are posting solid growth, even if not as charged as that of Suntech. The Reuters consensus forecast has Himax’s sales up 22% this year to $902 million compared with $738 million in 2006.

@page_break@Silicon Motion is expected to produce revenue of $138.6 million in 2007 — up 30%, compared with $106.5 million last year.

Merriman Curhan Ford & Co. analyst Jennifer West in San Francisco sees lots of opportunity in Himax. In her Jan. 5 research report, West notes that the company is not only supplying several growing markets — liquid crystal display televisions, mobile handsets and notebook computers — it is also uniquely positioned to capitalize on them.

West calculates that Himax has a 25% worldwide share of the market for semiconductors that create images on display panels. Since the number of LCD televisions is expected to jump by about 50% per year until 2009, the company should benefit.

Himax’s sales will jump almost 24% to $911.4 million in 2007, compared with $736.5 million in 2006, West estimates. Company earnings, she projects, will be up about 23%, hitting 43¢ per share this year, compared with 35¢ per share in 2006.

For its part, Silicon Motion gave investors a pleasant surprise on Feb. 1 with the release of results for 2006 that were better than expected and a more optimistic outlook for 2007.

A major catalyst for the positive returns was the performance of the firm’s line of flash memory-card controllers. Shipments of controllers for cellphones reached 48 million units in the fourth quarter of 2006, up from 30 million in the third quarter.

Deutsche Bank Securities Inc. analyst Pranay Laharia in New York significantly upgraded his projections for the company in his Feb. 2 research report. Laharia estimates Silicon Motion’s sales will be up 35% this year, to $143.3 million from $106.2 million in 2006. Earnings per share in 2007 will be $1.21, up 30% from 93¢ last year.

A stock favoured by all 11 of the analysts who cover it is AudioCodes Ltd. , an Israel-based developer of voice-over-Internet protocol networks. AudioCodes is coming off a very disappointing year, which was due to a pair of U.S. acquisitions it had trouble digesting — Neura Communications Inc. of San Diego and Netrake Corp. of Plano, Tex.

Nevertheless, analysts believe AudioCodes’ management finally has things in hand.

“Expectations are now reasonable and achievable,” concludes Ittai Kidron, an analyst for CIBC World Markets in New York, in a Jan. 7 research report. “VoIP demand trends remain strong, which gives us increased confidence in AudioCodes’ ability to achieve its targets.”

AudioCodes’ revenue will jump 26% to $185.2 million this year from $146.9 million in 2006, Kidron predicts. He expects earnings will rise 13% to 43¢ per share in 2007, compared with 38¢ per share last year. His projections are significantly more pessimistic than the Reuters consensus forecasts (see table, above).

Kidron explains that he wants to “leave the company with ample room to manoeuvre and deliver on results.” This suggests that if AudioCodes integrates its business units successfully, there could be some upside potential for Kidron’s 12- to 18-month share price target of $12. The stock was trading at about $10 in early February.

For investors who want to play the wireless boom in emerging markets — notably in Latin America and Africa — Millicom International Cellular SA of Luxembourg offers a way in. Its market capitalization of $6.9 billion has doubled since mid-2006, giving it a relatively pricey market cap/revenue ratio of 4.3.

On the other hand, the firm’s projected growth is impressive. Reuters consensus estimates predict sales will be up 52.5% this year, to $2.4 billion from $1.6 billion in 2006, while earnings over the same period will surge 89%, to $3.17 per share from $1.68 per share in 2006.

The two largest firms of the group — Infosys Technologies Ltd. of Bangalore, India, and Taiwan Semiconductor Manufacturing Co. of Taiwan — are surprisingly similar in some ways. Both are multibillion-dollar operations that were founded in the 1980s. Infosys is India’s pioneer in software services for third parties, while TSMC was an early leader in the art of manufacturing chips for third parties.

But these giants are now pursuing very different growth tracks. Infosys unveiled some very impressive results early in January for its third quarter of fiscal 2007, ended Dec. 31, 2006. Revenue was 3%-4% higher than forecast, and earnings, at 38¢ per share, beat the consensus forecast by 1¢.

All analysts who cover the company rate its management and prospects highly. Where they differ, though, is on the question of valuation.

Stifel Nicolaus & Co. Inc. analyst George Price in Baltimore had a “hold” recommendation on the stock following the company’s third-quarter results. In his Jan. 12 research report, Price notes that Infosys “continues to perform quite well,” but adds that its shares are trading at 25 times his fiscal year 2008 (ending Mar. 31, 2008) earnings projection, which is “basically in line with expected growth.”

However, 12 of the 17 analysts who cover Infosys feel the company’s long-term growth potential rates it a “buy.”

Jefferies & Co. Inc. analyst Joseph Vafi in San Francisco increased his share price target to $67 from $57 on Jan. 12. But Vafi added a caveat — he warns that Infosys’ relatively high price/earnings multiple makes it vulnerable to any sign of weakness. The first hint of profit compression — slowing revenue — could result in a sharp drop in Infosys’ shares.

Vafi’s forecast is for revenue of $3.1 billion in fiscal 2007, up almost 44% from $2.15 billion in fiscal 2006, ended Mar. 31, 2006.

In sharp contrast, TSMC’s revenue is expected to fall slightly, to $9.5 billion this year from $9.6 billion in 2006. Like other chipmakers, TSMC is working its way through a slowdown that started last fall and is expected to end in the second quarter of 2007.

In fact, a sizeable majority of the 22 analysts that cover TSMC rate it a “buy,” in large part because they believe TSMC — one of the industry’s top 10 chip firms, expected to continue rising in the ranking — is well placed to ride the coming recovery in semiconductors. IE