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Even before Facebook Inc. secured $500-million (U.S.) from Goldman Sachs and other investors this week, valuing the six year-old company at $50-billion, market watchers were speculating that this would be a good year for the tech sector.

Technology stocks as a group have languished over the past five years or more. But new devices and services - as well as the enormous valuation that Facebook now enjoys - are raising expectations for what lies ahead.

Robert Sluymer, of Royal Bank of Canada's investment arm in New York, thinks a new stock market cycle may have begun between last July and September. "Technology stocks are broadly showing evidence of early leadership in the new upside move," he wrote in a recent report. Historically, sectors that emerge from "technical purgatory," the way the technology industry is, often stage multiyear bull cycles, he said.

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Here are four themes to keep an eye on.

Apple's strength

Can anyone slow down Apple ? The darling of the tech sector appears poised to build on its market leadership in 2011 with updated versions of the iPhone and iPad. The iPhone will get a major boost when Verizon Wireless, the largest U.S. wireless carrier, begins selling Apple's iPhone as early as this month, finally breaking rival AT&T Inc.'s stranglehold on the iconic device.

Meanwhile, analysts estimate that shipments of Apple's tablet computer will double to 27 million units in 2011. Within the U.S. market alone, overall sales of tablet devices will more than double this year from last, to 24.1 million devices, according to Forrester Research. While rivals such as Research In Motion Ltd. are working on their own tablet products, the advantage clearly lies with Apple.

The battle for the living room

Apple, along with rivals Microsoft and Google , wants a bigger slice of the home entertainment dollar. Apple is ramping up efforts to deliver TV programming and movies directly to consumers in their living rooms and has just begun selling the second generation of its set-top box.

Microsoft is adding capabilities to its Xbox gaming platform, including the rollout of its wireless controller Kinect that allows users to interact with the device using spoken commands and gestures. Meanwhile, Google is moving to get major TV manufacturers to put its software directly into their units. By 2014, half of all HDTVs sold in the U.S. will be able to connect directly to the Internet, Forrester Research says.

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The huge popularity in the U.S. of Netflix Inc., the online movie rental firm that has just expanded into Canada, has proven that consumers are prepared to shake up their entertainment habits. Its shares rocketed 225 per cent in 2010.

Industry analysts say consumers are showing a willingness to surrender their music libraries at home for streaming services that offer unlimited playtime for a subscription. Sony has just launched an online subscription service in parts of Europe and is expected to bring it to North America in 2011.

A boom in mobile

Companies that make mobile communications gear - from handsets and battery chargers, to broadband access devices and routers - will see sales surge 15 per cent in 2011 to $271-billion from an estimated $235.5-billion in 2010, according to iSuppli, a research firm in Segundo, Calif.

One of the biggest winners to date is ARM Holdings of Cambridge, England. ARM has become the leading chip designer for smart phones and tablets, including the iPhone and iPad.

For the past two decades, Intel has set the pace for PC development with its semiconductor technology. But ARM's technology leads the mobile sector because it trades power for energy efficiency, giving mobile devices a battery life that Intel's PC chips lack.

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For now, Intel's answer for the mobile community is its Atom chip, and this month it is expected to launch a new chip for PCs called Sandy Bridge that will combine central processing and graphics processing onto the same piece of silicon.

But the investment community remains skeptical about Intel's ability to catch up in the rapidly developing mobile space. The shares have lagged the overall market, gaining only about 2 per cent in 2010, and some question whether the company will hit its financial targets for this quarter as demand for PCs stagnates.

Cheap giants

The hot trends in the tech sector have opened a valuation gap among stocks. Facebook, for example, is already worth more than twice what Google registered when it went public. Netflix trades at 68 times earnings.

In contrast, some of the industry's giants appear deeply discounted. Microsoft changes hands at a price-to-earnings multiple of just 12, despite double-digit growth in sales and profits.

Another titan, Cisco Systems Inc., the network equipment maker, trades at 15 times earnings. Analysts say the company has begun to lose market share in its core businesses of routers and switches.

Many investors are now looking at those smaller rivals for growth. Shares of rival Juniper Net. have been on a steady climb since last summer and are now at their highest since the tech bubble burst a decade ago.

Ciena , a small fraction of Cisco's size, also has momentum. The shares are up almost 50 per cent since the beginning of November, and Mark Sue, an analyst with RBC, rates the stock "outperform" with a price target of $26.

Four to watch in 2011

Microsoft Corp.

Despite annual sales growth of 16 per cent and profit growth of 13 per cent, shares of the world's largest software company languish, selling at just 12 times earnings. Analysts fret that the old guard tech giant has been out manoeuvred by younger, more agile players. But value investors see an opportunity to get a piece of the cash-rich Windows franchise cheaply.

Ciena Corp.

The network equipment maker is just a fraction of the size of industry leader Cisco, but it has momentum on its side. Its shares rose more than 50 per cent in the last two months of 2010 and could climb higher. "The combination of a product transition, increasing demand and improved execution may drive sufficient earnings growth to drive the shares higher," writes RBC Dominion Securities analyst Mark Sue. The shares are trading at only 1.1 times his sales estimate for 2011.

Apple Inc.

Although the shares soared more than 50 per cent last year, the company is building on its foundations with updated versions of the iPhone and iPad expected during the first half of the year. The growing reach of Apple makes it difficult for any tech investor to ignore the stock, which trades at a multiple of about 22 times earnings.

ARM Holdings PLC

The British company has become the leading designer of chips for smart phones and tablets and its technology is used in both the iPhone and the iPad. ARM's business model avoids the need to invest in expensive fabrication plants. Shares of the company have become expensive, trading at more than 80 times earnings. But tech investors may find it hard to bypass a company that has beaten tech giant Intel Corp. at its own game.

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