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Strategies & Market Trends : MDA - Market Direction Analysis
SPY 691.79+0.6%Jan 6 4:00 PM EST
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To: Joan Osland Graffius who wrote (53072)6/5/2000 9:19:00 AM
From: Box-By-The-Riviera™   of 99985
 
A possible downside of the technology boom

Monday June 5 7:30 AM ET

Technology Boom Also Has Its Downside

BASEL, Switzerland (Reuters) - The Bank for International Settlements (BIS) warned in a
report published on Monday that the boom in the economy tied to new technologies also has a
negative side.

The BIS said in its annual report that new technologies are enhancing productivity, and
reducing margins, but in some cases they also have eroded profitability.

New technologies have reduced costs by lessening inventories
but meanwhile profits are being squeezed. Part of this is due
to ``growing depreciation charges, reflecting the short duration
of recent investment in equipment,'' the BIS said.

Such spending was ``increasingly being financed by firms
taking on more debt,'' it added.

It also noted a type of leverage effect, saying ``many of the recent acquisitions around the
globe were paid for using the equity of the acquiring company rather than cash.''

``With the advantage of high stock prices, technology companies could take over
non-technology companies and potentially use the acquired companies' internal cash flows for
their own investment purposes,'' the BIS said.
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