Technology shares on the JSE have been hit hard by the global economic slump, with many losing more than half their value in the past year. However, many of these companies look set to ride out the storm fairly well, having already experienced a severe recession earlier in the decade when the dot-com bubble burst.

Analysts say many IT companies have learnt the lessons from the contraction that followed the technology boom and bust between 1999 and 2003. They're now more nimble and know that they must deal with problems sooner.

Still, even this time around, they've had the stuffing knocked out of their share prices. One of the first areas typically earmarked for spending cuts when the economy turns south is technology. Companies delay upgrades of computer equipment. And they put the squeeze on their suppliers' prices, which in turn puts pressure on the profit margins of IT companies.

When the turn comes, though, IT shares could offer very good value for astute investors. A number of well-run JSE-listed technology companies are trading on forward p:e multiples in the middle and even lower single digits. And at least one analyst polled by the FM believes that, even with the inevitable poor results to come, IT shares may already be near the bottom, if, in fact, they haven't bottomed already.

Irnest Kaplan of Kaplan Equity Analysts believes there is good value to be had among some of the smaller IT shares. He says companies such Datacentrix, GijimaAst, Simeka BSG and EOH - he calls the latter a "blue-chip IT share" - offer great value at their current levels. But he says investors need to be careful as a few of the smaller firms may not survive the economic slump. He points to the example of Faritec, which has got itself into serious trouble by not reacting quickly enough to a slump in sales. "There could be a few more Faritecs out there."

He says that this is no time for short-term thinking when it comes to investing. "The market could fall another 10% or 15%. But if you have a two- or three-year investment window, then you could see some very good returns." And the smaller caps should outweigh the bigger tech stocks, in part because fund managers have sold them down so heavily because of a perceived risk associated with them.

Kaplan is not as keen on the big three in this year's Top Companies survey (ranked by net profit) - Dimension Data (Didata), Datatec and Business Connexion (BCX).

Didata is a well-run firm, but because of the worldwide slowdown in networking sales - the group's bread and butter business - Kaplan thinks the share may be overvalued. CEO Brett Dawson has run the company "exceptionally well", Kaplan says. "He's done a sterling job, is well liked by the investment community and is professional in his approach." But he says Didata's share price, which has held up well, may offer less long-term value than some of the smaller-cap IT stocks.

The liberalisation of SA telecoms - Didata owns one of the largest independent telecom businesses in Internet Solutions - may help explain some of the buoyancy in the group's share price. Its successes elsewhere in Africa may be helping, too, but he points out that this is still a relatively small contributor to Didata's global sales.

"At the results presentation in November, Dawson wouldn't give any guidance because conditions are so dodgy," he says. But with its interim results in May the group beat analysts' forecasts. Sales slowed in the US, where it is heavily reliant on financial services business in the crisis-hit New York region. But its operations elsewhere performed well.

Then there's Datatec. Its share price has plummeted in the past 12 months. "There is a perception that Datatec hasn't been as well managed in recent years as Didata," Kaplan says. "Datatec hasn't done anything particularly badly, it's just that it hasn't had as good a management team in the past few years."

Counting against Datatec is the fact that it is still heavily reliant on its networking distribution business, Westcon, where margins are razor thin. Didata, on the other hand, has a large services business which helps to buffer the group against a severe margin squeeze.

"Datatec is a real barometer of the global networking business. It is a big working capital machine and has to manage its operational gearing very carefully."

The group, though listed on the JSE, is principally based in Western Europe and the US. However, CEO Jens Montanana indicated last year that the company is looking to grow the contribution faster-growing emerging markets make to revenue.

Business Connexion, on the other hand, has internal problems it has to contend with, in addition to the economic slowdown. BCX is the least globalised of the big three SA IT companies and may be cushioned to some extent from the meltdown in the US and Europe.

However, Kaplan says BCX has a unique set of challenges. The new management team, led by CEO Benjamin Mophatlane, has a difficult job to turn the group around. He says the change in management team happened at a bad time. "When you change the management team in a climate where sales are slowing, you get huge costs coming out of the woodwork and profits get hurt."

It can take years to turn a ship as big as BCX around, Kaplan says. "If the management can keep things steady and not make huge losses in this period, then it might come out well in the end when the market turns."

But he thinks BCX might soon become an acquisition target. He says Altron might make an offer to buy the company. Another possibility is T-Systems, a subsidiary of Germany's Deutsche Telekom. At the time of writing, in mid-April, T-Systems was in the throes of acquiring state-owned IT company Arivia.kom.

"Things are cheap now and this is the time for companies to be buying," Kaplan says.