Tech Industry Forced To Care About Interest Rates

from the where-credit-is-due dept

Historically, major tech firms have shunned debt financing, but in recent years, this has changed somewhat. Highly acquisitive companies like Cisco and Oracle have started to use some debt to finance their purchases. As with the increasing presence of private equity in the tech industry, low interest rates have helped fuel this trend. But the low interest rate environment appears to be coming to an end, and its effects are already being felt in the industry. Yesterday, online travel site Expedia announced that it would suspend a planned share buyback program because it couldn't acquire the necessary capital to finance the purchases. Meanwhile, a few non-tech private equity deals are hitting the skids for similar reasons. In the past, industry, might have ignored these economic developments, but it's likely that a number of companies, particularly mature ones, are going to feel a pinch.

Reader Comments (rss)

(Flattened / Threaded)

  1. identicon
    Ajax 4Hire, Jul 24th, 2007 @ 11:55am

    Live debt free of die after a hard life.

    I know debt can be useful to grow a company.
    But I would rather be debt free, free from the
    reporting required to banks, Venture Capitalist, lean holders. Forever making reports, charts, presentations on progress, it becomes a job in itself.

    reply to this | link to this | view in thread ]

  2. identicon
    Evostick, Jul 24th, 2007 @ 1:42pm


    If you've got a mature business with a steady stream of cash coming in then why wouldn't you finance with debt. It's much cheaper (lower interest charge and tax breaks).

    reply to this | link to this | view in thread ]

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