Amid some of the most trying economic conditions seen for some time, the number of profit warnings in both the FTSE Software & Computer Services and Technology Hardware & Equipment sectors declined in the second quarter of 2008.

This is according to recent research from Ernst & Young, revealing a total of nine profit warnings issued by seven companies in the software sector in the second quarter, down from 13 in the first quarter. For technology hardware, three warnings were issued from its constituents, versus seven in the previous quarter. During the same period last year, the software sector experienced 15 warnings and there were three warnings from companies in the technology hardware space.

Why then, against a worsening economic backdrop, are fewer warnings emanating from the technology sector now? Particularly in light of the fact that 98 UK-quoted companies, across all sectors, issued profit warnings in this latest quarter, the highest Q2 figure since 2001.

According to Ernst & Young’s technology director, James Bennet, ‘One of the reasons why the number has dropped is that most organisations have been having quite a tough period for the past 18 months and so a lot of the bad news is already out in the market place’. As a result, ‘technology companies would appear to have got better forecasting in place.’

However, he adds that while the reduction in profit warnings is ‘a positive improvement’, this should ‘not take away the challenging market conditions that technology firms are facing at the moment – some of the most difficult in the past five years.’