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Corporate Tech Spending Helped Set Stage for Slump

Economy: After years of pouring money into equipment, many firms have reined in their orders.


At 21st Century, Web developers initially geared the Web site so that California auto-insurance customers could do things such as pay bills and file claims online. Now the company is working to expand services to customers in other states and those buying other types of insurance.

The economic slowdown has a silver lining of sorts for firms that are still buying equipment: A glut of supply has given them the upper hand in driving hard bargains.

Korn/Ferry's Demeter, for example, is negotiating to buy some software, and the seller's asking price now is "nowhere near what is was" when discussions began, he said.

"The price just keeps going down and down," Demeter said.

That trend may prove widespread, especially in sectors such as telecommunications, where a huge number of competitors have emerged since the mid-1990s.

"Whenever supply and demand get out of balance, it tends to be a buyer's market," said Robert Ray, a telecom analyst at Moody's Investors Service in New York. "The real question is: How many buyers are there?"


Tech Boom Slows Down

Corporate spending on technology equipment began to rocket in the mid-1990s, and growth in spending last year topped 25%. But growth this year is expected to fall sharply as companies complete tech projects and as the weaker economy discourages major outlays.


Annual growth in private-sector dollars spent on information-processing equipment

and software

2000: 25.4%

Sources: Bureau of Economic Analysis, Prudential Securities


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