It was a year of contradictions and reversals for tech companies.

The layoffs continued for many big firms, and an air of caution lingered — five years after the dot-com bust crippled the industry. Fearing that customer spending wouldn’t rebound soon, companies scrambled to find merger partners.

But investors showed no lack of enthusiasm for Google, (GOOG) whose torrid stock growth recalled the go-go 1990s. And their zeal helped propel other Internet stocks, including Yahoo (YHOO) and Amazon.com. (AMZN)

It also was a year of old dogs learning new tricks. Microsoft (MSFT) looked beyond traditional software toward Web services. And it had its biggest hit of the year with the Xbox 360, a game machine that sold out within hours of its release in November.

Hewlett-Packard (HPQ) changed CEOs, slimmed down and set its sights on new markets, such as flat-screen TVs. Investors liked what they saw, bidding up shares 37% last year.

Apple Computer, (AAPL) meanwhile, cemented its status as an entertainment giant. Sales of its iPod music player soared. And it unveiled a video version of the device, replete with TV content from studios.

On the flip side: Dell, (DELL) the former darling of the personal computer industry, slipped into a funk. The company missed financial targets and watched its stock fall more than 25% last year.

In the end, most of the news in 2005 was good. Companies changed for the better. And the industry geared up for a new era of computing and communication.

These are our choices as the biggest tech stories of 2005:

• 1. Google’s stock seems to know no bounds. After debuting at $85 in August 2004, shares of the search engine rocketed past 200 in February, surged past 300 over the summer and topped 400 in November. The stock trades near 415.

How high will Google shares go? It’s hard to say, though some analysts have already set their sights on the 500 mark.

Google doesn’t provide earnings guidance, which has made every quarterly report a surprise — and so far, an upside surprise. The firm has blown past analyst expectations every quarter since it went public.

In this respect, Google’s last quarterly report was typical. The company posted earnings of $1.51 a share — excluding one-time items — up 116% from the year-ago period. Analysts had expected $1.36 a share. Sales nearly doubled to $1.6 billion. Almost all of Google’s sales come from online advertising.

The company is bound to face more competition in the future — especially from Yahoo and Microsoft. But Google’s recent plan to invest $1 billion in Time Warner’s (TWX) America Online unit could help it reach even more advertisers.

• 2. The iPod cements its dominance. Apple’s iPod, an unexpected hit when it debuted in 2001, has grown into a worldwide phenomenon. Apple sold an estimated 20 million of the devices last year. It’s expected to sell 43 million in 2006.

Despite a flurry of competing products, the iPod remained the market share leader last year by a wide margin. And Apple didn’t rest on its laurels. The company released a video iPod in October and began selling downloadable TV shows for $2 a pop. Within 20 days, it had sold 20 million videos.

IPod accessories also have flourished. More than 1,000 items work with Apple’s device, creating an iPod economy. But Apple will face tougher challenges in 2006, when more music-equipped cell phones hit the market.

• 3. Podcasts and other portable media take root. The iPod also helped create a new form of media: podcasts — radio shows that listeners download to their iPods. The idea is to let people have their own radio show and instantly distribute it all over the world.

If blogging was the trendy form of communication in 2004, podcasts certainly held that distinction in 2005. As podcasts attracted more listeners, established media companies and advertisers scrambled to get into the act. And now that video-equipped iPods and cell phones are taking off, podcasts are increasingly adding video.

• 4. Hewlett-Packard stages comeback. Carly Fiorina’s 4 1/2-year stint as chief executive of HP came to an end in February. After she pushed through the merger of HP and Compaq in 2002, the promised payoff never quite materialized. Fiorina, once lionized by the media, took the fall.

The company replaced Fiorina with former NCR (NCR) Chief Executive Mark Hurd, who had a reputation as a cost cutter. Indeed, Hurd unveiled a plan in July to cut 14,500 jobs and save $1.9 billion a year.

The company’s finances have already improved under Hurd — though he’s quick to admit that the comeback was under way when he arrived. The company has beaten earnings expectations in recent quarters, and investors have bid up shares 45% since Hurd was hired.

But some want Hurd to take more dramatic steps to streamline the hulking maker of computers and printers. A vocal faction would like to see HP broken into parts — fully undoing the empire-building strategy of his predecessor. So far, Hurd hasn’t moved in that direction.

• 5. Tech layoffs continue. HP wasn’t alone in announcing big staff reductions last year. IBM said it would trim some 13,000 jobs — mainly in Europe. And almost all of the tech industry’s myriad mergers in 2005 resulted in staff cuts.

In fact, tech layoffs grew in the first nine months of 2005 vs. the same period of 2004 — despite signs of an improving economy. U.S. tech firms trimmed more than 140,000 jobs, according to Challenger, Gray & Christmas. That was up from 118,000 in the year-ago period.

• 6. EBay and others bet big on VoIP. Every tech company seemed to have a plan to add VoIP last year. The technology — short for voice over Internet protocol — lets users place phone calls online, often at little or no cost. After Vonage and Skype popularized the idea, more established firms wanted a piece of the action.

That included eBay, (EBAY) which in September announced it would buy Skype for around $4 billion. Not everyone saw the deal as a perfect fit for the online auctioneer. But Skype could help eBay’s buyers and sellers communicate more easily. And the acquisition creates a new source of revenue for eBay, which is starting to see its breakneck growth slow.

Others, including AOL, Google, Microsoft, Sony (SNE) and Yahoo, are investing in the idea. Voice calls have emerged as part of the next generation of instant messaging — now mainly just text. And everyone is taking note.

• 7. Mergers reshape telecom field. The phone industry’s high-stakes game of musical chairs continued in 2005 with a number of megadeals. The companies that once dominated long-distance phone service — AT&T (T) and MCI (MCIP) — were swallowed up by rivals. And Sprint closed its acquisition of Nextel, creating Sprint Nextel. (S)

SBC, which bought AT&T for $16 billion in November, decided to take the name and ticker of its more storied acquisition.

Verizon Communications’ (VZ) $8.6 billion purchase of MCI, meanwhile, is expected to close early in 2006. Verizon beat out another regional Bell, Qwest Communications International, (Q) to make the deal — despite a higher bid by Qwest. Qwest, which is crawling out of debt, was seen as a riskier suitor.

The consolidation should help the telecom firms compete in the cutthroat long-distance phone service market. And with more heft, they expect to make deeper inroads into Internet services.

• 8. Oracle continues acquisition spree. After closing a hostile takeover of PeopleSoft in January, Oracle (ORCL) didn’t let up. The company snapped up a number of smaller firms and then set its sights on Siebel Systems (SEBL) in September. The $5.8 billion deal should help Oracle compete with Germany’s SAP, (SAP) the No. 1 maker of business applications.

And it represents a full circle for Tom Siebel, Siebel’s founder, who used to work for Oracle.

But size alone may not help Oracle and SAP prepare for software’s future. Customers increasingly want their programs delivered online — as a service. Though all the major software makers, including Microsoft, look to provide that option, upstarts may have an advantage.

• 9. Supreme Court rules against Grokster. Peer-to-peer Internet networks, which let users swap songs, videos and other files for free, suffered another blow in June. The Supreme Court ruled that the Grokster P2P service was illegal and that it was responsible for the copyright violations of its users. The Grokster site closed in November.

Though other P2P sites are still going strong, the ruling appears to have dampened the number of illegal downloads.

Six months after the ruling, the research firm NPD Group found that families using illegal P2P sites fell by 11%.

• 10. DVD giants part ways. A looming showdown between rival next-generation DVD standards added a bit of drama to the consumer electronics field last year. Two camps touting different technologies — Blu-ray and HD DVD — failed to come to a compromise.

That means we could have another VHS vs. Betamax-style battle in the coming year.

Both technologies have the same basic goal: switching the red laser on current digital video disc players with a blue laser. That helps the discs handle higher-definition video and other features.

As for which standard is better, consumers might have to decide.

Blu-ray’s backers include Sony, Samsung, Philips Electronics, (PHG) Apple and Dell.

On the HD DVD side: Toshiba, Intel, (INTC) Microsoft and others.

The Blu-ray movement is expected to get a jump on its rival this month, when Panasonic unveils a Blu-ray player at the Consumer Electronics Show in Las Vegas.

One additional wrinkle: Some companies, including HP, are expected to support both standards.