Think Small, Think Innovation, Think Tech

A trio of technology behemoths-International Business Machines (NYSE: IBM), 3M (NYSE: MMM) and Microsoft (NASDAQ: MSFT)-will disclose their earnings this week.

Although IBM shares rallied some 20% since early March, today's numbers aren't expected to thrill owners or potential buyers of Big Blue. The current economic crunch has killed corporate appetites for high-tech hardware and for consumer PC purchases. Revenue is expected to slip by 8% to $22.5 billion.

On top of that, Oracle scooped up Sunmicrosystems (NASDAQ: Java) today after IBM had been wooing it.

At least IBM came forward to give the public and its shareholders a glimpse of what to expect.

In an unprecedented and out-of-character act, Microsoft Corp. declined to offer a forecast because of the sour economic climate, but did say it expected to report declines in profit and sales on Thursday.

3M appears to be pretty hush-hush about what it will report on Friday. All of the news items I read simply gave the date and time but offered no meat.

As far as I'm concerned, the tech run is about to come to a screeching halt with those in the large-cap corner feeling the brunt of punishment. Poor earnings and forecasts will trigger a round of profit taking and those 20% gains will disappear faster than I can say, "stick to small caps."

I know these companies have been around forever, and they'll be around for a long time (bar an unforeseen scandal). But, I believe the companies that think outside the PC box will fare better over the short-term and especially as the economy slithers from recession.

These large caps are the squeaky wheels that get the grease, but I'd be paying attention to some lesser known, on the cusp, innovative companies. Don't take my word for it. History backs me 100%.

In all but one year, from 1926 to 2006, small-company stocks outperformed the largest stocks, according to Ibbotson Associates. In fact, after the 15 bear markets since 1932, small-caps outperformed large-caps 12 times, according to research from The Leuthold Group, a Minneapolis-based firm.

For example, the 12 months following the 2000-2002 bear market, small-cap performance nearly doubled that of large-caps, 46% vs. 24%. Another illustration of this wide gap came a year following the 1982 crash when small-caps surged 96% compared to 59% for their large-cap counterparts.

 That's enough about history.  Let's turn to how you can profit in the here and now. Below are a few small-cap companies that occupy unique spaces in the technology sector.

First, on my list is United Online Inc. (NASDAQ: UNTD). This company provides Internet services in U.S., India and Germany. Owners of NetZero, Juno and Classmates.com, it also pays a juicy 6% dividend. Since hitting a five-year low on March 9, shares are up more than 25%.

So, here's an income-producing global tech play. I like the sound of that.

Another creative small-cap tech stock is Allscripts (NASDAQ: MDRX). This stock actually hit a six-month high two weeks ago. It's up about 8% year-to-date and more than 100% since October 2008.

Allscripts provides e-prescribing technologies-one of the hottest arenas out there today. This is basically a doctor's ability to electronically send an accurate, error-free and understandable prescription directly to a pharmacy.

The medical/technology combination is very appealing, especially when there's pending legislation to provide financial incentives to promote the adoption of e-prescribing.

Finally, I like GeoEye (NASDAQ: GEOY), a leading provider of global space-based and aerial imagery and geospatial information. Its imagery is used in a broad array of applications that include: government monitoring and surveillance, intelligence gathering, construction planning, scientific research such as environmental monitoring, and the online mapping industry via Google (NASDAQ: (GOOG) Yahoo! (NASDAQ: YHOO), Microsoft (NASDAQ: MSFT) and other partners.

Recently, the U.S. government said it would buy expensive new spy satellites and order more imagery from two commercial providers, one of which is GeoEye. The government put a price tag of $10 billion to develop the plan.

Once the dollars begin flowing, it will amp up GeoEye's revenues, margins and profits.

Think small, think innovation, think outside the mainstream box. You can catch the small-cap tech wave with any or all of the above companies.