NEW YORK (CNN/Money) - Technology, despite concerns about the war in Iraq and the still sluggish economy, was the best performing sector in the first quarter.

The S&P Technology index was up 3.8 percent as of March 27, compared to a loss of 1.3 percent for the broader S&P 500. And some beaten down techs surged in the first quarter on hopes that the tech sector has finally bottomed.

Telecom equipment companies Corning, Alcatel, Nortel and Lucent all enjoyed double-digit percentage gains. Internet stocks were big winners as well, with Expedia, Yahoo! and DoubleClick leading the way.

But is this rally for real?

While the telecom equipment companies have done well, telecom service providers (the companies that buy the equipment) have been among the worst performers. Long-distance companies AT&T and Sprint, Baby Bell SBC Communications and Qwest all slumped as the outlook for the local and long distance market has continued to weaken.

Top Techs The ten best performing tech stocks with a market value of at least $1 billion. Company  YTD price change*  Industry  Rambus  103.1%  Semiconductors  Corning  81.9%  Telecom equipment  Alcatel  64.2%  Telecom equipment  Expedia  62.0%  Internet services  Interdigital Communications  60.1%  Telecom equipment  American Tower  55.0%  Wireless telecom  Yahoo!  49.3%  Internet services  Semtech  45.7%  Semiconductors  MEMC Electronic Materials  45.4%  Semiconductor equipment  Cable & Wireless  45.1%  Telecom services   * Through Mar. 27  Source:  Thomson/Baseline

What's more, any optimism for tech doesn't seem to be based on a rosy outlook for the first half of the year. Some companies, most notably Oracle, have said that as war fears escalated, big businesses again slowed spending after a rebound in January.

"If Oracle, when it came to crunch time in February, had a tough time getting new business, then companies whose crunch time is this week will have a tougher time still," said Arnie Berman, chief technology strategist for Soundview Technology Group.

To that end, first quarter earnings estimates have come down since the beginning of the year.

According to First Call, analysts are predicting earnings growth of 11 percent for technology stocks. At the beginning of the year, expectations were for 16 percent growth.

Second quarter estimates are slowly heading south as well. At the beginning of the year, analysts were forecasting earnings growth of 25 percent. Now, analysts expect growth of 23 percent.

But analysts still have bullish views about the second half of the year. They are expecting growth of 54 percent in the third quarter, up from 50 percent at the beginning of the year. And for the fourth quarter, estimates have increased from projected growth of 20 percent at the beginning of February, to 28 percent growth.

Bottom of the barrel The ten worst performing tech stocks with a market value of at least $1 billion. Company  YTD price change*  Industry  SK Telecom  -36.3%  Wireless telecom  AT&T  -35.6%  Telecom services  Konami  -32.6%  Application software  CANTV  -28.7%  Telecom services  Satyam Computer  -27.0%  IT consulting  Qwest Communications  -26.8%  Telecom services  PCCW   -25.9%  Telecom services  SBC Communications  -23.1%  Telecom services  Turkcell  -22.5%  Wireless telecom  Agilent Technologies  -21.3%  Electronic equipment   * Through Mar. 27  Source:  Thomson/Baseline

Analysts are known for excessive optimism however, so these growth expectations may very well be too high.

But Pip Coburn, global tech strategist with UBS Warburg, said that these numbers still appear to be attainable. The first quarter is normally weak anyway due to seasonal factors and the war is obviously not helping, but investors should not assume that the whole year will be bad, he said.

"It's too early to pull the plug on 2003 estimates," said Coburn. "If things don't pick up by June or July then numbers will have to come down."

Berman said he's hearing from technology companies that customers are delaying spending in the short-term, which will probably put a crimp on revenue growth in the first half of the year. But he added that customers are saying "Come back later" as opposed to "Go away," which could be a good sign.

"The key question is whether or not business that's not getting closed is representing postponed business or forgone business," said Berman. "The anecdotal evidence is indicating that business is probably postponed."

If Berman is right, then the tech sector might end its three-year bear run. But if we're still talking about weak demand for tech this summer, then this first quarter pop will probably be looked back on as just another sucker's rally.