NEW YORK (CNN/Money) - Wall Street's troop of technology analysts are at it again. Sure, this year was bad, they say, but next year tech earnings are going to bounce back by a whopping 35 percent. To skeptics, it sure seems that even after three years of stock market pain these lithium-addled souls still haven't learned their lesson.

But here's the catch: This time around the analysts may actually be right.

The technology industry's big problem, broadly speaking, is the corporate spending cutbacks that began in late 2000. Tech outfits were accustomed to outrageous growth and were geared up as if it would last forever. When the slump came they found themselves with more plants, people and competition than they could handle. Because companies had such high fixed costs (to pay workers, keep the lights switched on, etc.), the sales decline led to a much bigger decline in earnings. Intel, for example, saw its revenues fall by 21 percent in 2001, but its earnings dropped by 68 percent.

Now the process looks like it's beginning to unwind, which could make for a decent pick-up in sales, and an even bigger increase in profits.

After a long hiatus companies are stepping up purchases again. According to the Commerce Department, Corporate America increased technology outlays by an annualized 10.3 percent in the third quarter and people in the business of selling technology are beginning to feel a whole lot better.

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"Just looking at the way orders have started to pick up, it looks like we've hit bottom," said Carl Chrappa, whose Independent Equipment Co. sells used semiconductor-manufacturing equipment. "Last year this time the secondary-equipment market was at its worst in history -- I've been doing this since 1970, and I never saw anything like it. Now you get stuff and there's an actual possibility that you can sell it."

That increased demand for chipmaking equipment reflects an increased demand -- and expectations of increased demand -- for chips. Global chip sales steadied this year, starting off poorly but improving to the point where it looks like 2002 will be fractionally better than 2001. Next year the Semiconductor Industry Association forecasts chip sales will increase by 20 percent.

All this flies in the face of a strongly held belief among many Wall Streeters: that U.S. companies bought so much technology equipment in the late 1990s that they don't know what to do with it.

"This notion that there's just too much tech everywhere contrasts with the fact that there's actually been a spending improvement," said Salomon Smith Barney economist Steven Wieting. "If we really were just choking in technology right now, companies wouldn't be spending money on it." (This contrasts with telecom equipment, where there is just way more capacity than anyone knows what to do with.)

The fact is that much of the tech equipment that companies have on hand now is getting long in the tooth. Credit Suisse First Boston strategist Paddy Jilek has pointed out that the peak growth rates in computer and peripheral investments occurred from the middle of 1997 through early 1998.

The reason: Companies were bringing new computers online in front of Y2K. The implication, says Jilek, is that much of the equipment purchased for the Y2K buildout is now five years old.

"The life of the computer has been stretched out," said Semiconductor Industry Association analyst Doug Andrey. "But now you have a lot of computers that are reaching the end of their physical life."

Even the old computers that have weathered the years without getting too many kicks to their hard drives and cans of coke spilled on their keyboards could be lumbering toward the PC graveyard soon. The dominant operating systems during the Y2K buildout were Microsoft's Windows 98 and NT 4.0. On June 30 next year both are going to enter what Microsoft calls the "non-supported phase" (translation: don't call Microsoft with your problems). This will force many companies into an upgrade cycle.

And it's not just Microsoft. Oracle and SAP have recently indicated they won't be supporting some older versions of their software. So long as the economy doesn't dip anew into recession, it looks like companies will have some strong incentives to scuttle their older tech equipment.

"We can look forward to an improved spending climate next year," said Ed Hemmelgarn, who runs the Cleveland-based hedge fund Shaker Investments. "Is it off to the races? Of course not. But it's getting better than it was."

And just getting better, it turns out, could do wonders for profits at many tech companies. Just as earnings crashed harder than revenues on the way down, they can bounce back by more on the way up. In short, sales go up by a bit, but, because costs don't rise with them, much of that revenue gain drops down to the bottom line.

"A modest pickup in revenues," said Hemmelgarn, "can translate into a huge pickup in profits."