A handful of cash-rich companies are consolidating power in
the technology industry, using their wealth to expand into new businesses and
making it harder for small and midsize competitors to break through. Why the
industry is evolving this way is rooted in balance sheets. Over the past two
years, Apple Inc., Oracle Corp., Google Inc., Microsoft Corp. and six other
large tech companies have generated $ 68.5 billion in new cash, compared with
just $13.5 billion for the other 65 tech companies in the S & P 500 Index
combined, according to a Wall Street Journal analysis of data provided by
Capital IQ. The rich few are funding investments at a time when
many others have retrenched. Over the past year, Oracle paid $ 7.4 billion to
get into the hardware business by acquiring Sun Microsystems, and Dell Inc.
bought Perot Systems to add technology services. Cisco Systems Inc. spent more
than $ 7 billion to acquire six companies. Google, meanwhile, has tapped its
savings to fund moves into computer operating systems and mobile phones.
Microsoft has financed its money-losing quest to take on Google in search with
its cash. And Apple has used its reserves to develop the iPad and take aim at
Google recently by acquiring a mobile-advertising company. Because of their
massive cash accumulation, these companies can afford to take risks that smaller
companies can’t at a time when the economy remains fragile. The result is a
bifurcated (一分为二的) tech landscape, says Erik Brynjolfsson, a professor at the
Massachusetts Institute of Technology’s Sloan School of Management.
The repercussions from the cash discrepancy are being felt throughout the
industry. Some midsize tech companies are giving up trying to compete with their
larger rivals. Others are gearing up to make their own acquisitions so as not to
be left behind. For example, online-software maker Salesforce. corn Inc. nearly
doubled its cash reserves in January by taking on $ 575 million in debt that it
says it will use in part for future expansion and acquisitions. Other midsize
tech companies, such as Ciena Corp., have recently scooped up smaller rivals to
bulk up. From the end of 2007 to the end of 2009, the 10 richest
tech companies increased their cash levels by 48% to $ 210 billion. The other 65
tech companies listed in the S & P 500 upped their cash only 13% in the same
period, to $118 billion. The upshot: The gap between the groups stood at a
record. The gap would be even larger, except an accounting change caused Apple
to designate about $10 billion of its holdings as long-term investments. To cope with the difficulty, some midsize companies choose to give up competing, others decide to ______.