Open letter to all the skeptics: This tech rally is real.

I can forgive some apprehension after Intel's (NASDAQ:INTC) report, which was so good that it surprised even the company's own management. Then, Apple (NASDAQ:AAPL) delivered predictable excellence in a nutshell, and your doubts should have started to fade. VMware (NYSE:VMW) showed that the software side of the house can shine, too.

And now, with last night's fourth-quarter report from Western Digital (NYSE:WDC), the two largest hard drive makers have reinforced the unmistakable message: People are buying gadgets and computers again. The drought is over.

Western Digital managed to pull an Intel and surprise itself. Forty million hard drives shipped translated into $1.9 billion in revenue, and net income of $0.86 per share. That's a unit volume record for the company, and both sales and profits have nearly returned to where they were a year ago. The stock’s trading down today on concerns it’s risen too fast, up 200% since November. But don't be fooled -- this was an amazing quarter.

Last quarter, management set its sights on fourth-quarter revenue around the $1.5 billion mark, a 15.4% gross margin, and earnings no higher than $0.24 per share. Have a look at the actual margins:


Q4 2009

Q3 2009

Q4 2008













Across the tracks, chief rival Seagate Technology (NASDAQ:STX) told a very similar story last week. 40.6 million drives shipped, $2.35 billion net sales, and adjusted net income of $0.06 per share combined to give both Seagate and Western Digital shares a boost. Together, the two companies tell a rather complete tale of market health: Western Digital goes after netbook contracts aggressively and likes to rule the lower end of the market, as evidenced by an average selling price of $48 per drive. Seagate's average prices are much higher at $58 per unit -- but both businesses are doing just fine.

Yes, there are exceptions to the recovery. Microsoft (NASDAQ:MSFT) seems stuck in the mud until Windows 7 hits store shelves in a couple of months. Advanced Micro Devices (NYSE:AMD) had to clear out old inventory, while Intel thrived on new product sales this quarter. But these are the exceptions -- not the rule. Evidence has reached critical mass on the bullish side of this argument.

Convinced of this market recovery yet, Doubting Thomases? I really think you should be. Feel free to tell me off in the comments box below, though.

Further Foolishness:

Start investing today – just $7 per trade with Scottrade. Or find the broker that’s right for you.