Forsythe Technology Inc.: With Interest Rates Inching up, Some Companies Rethinking How to Acquire Needed IT Equipment

Wednesday, November 02, 2005

SKOKIE, Ill.--(BUSINESS WIRE)--Nov. 2, 2005--U.S. organizations plan to increase IT expenditures by 5.5 percent in 2006, according to preliminary results from a recent Gartner, Inc., survey. Yet, with interest rates on the rise, finance and IT managers may be beginning to rethink their IT budgeting and acquisition strategies, according to one industry expert.

'We are now fielding a number of inquiries from customers concerned about how they can better manage their critical IT portfolios in the evolving economic climate,' said John Carcone, senior vice president of financial services at Forsythe Technology Inc., a provider of information technology infrastructure and leasing solutions. 'As interest rates increase and money gets more expensive, it's important to determine the best method for acquiring and financing needed IT equipment.'

Carcone believes this may signal an uptick in interest in leasing as an alternative.

'Our experience over the years in every type of economic cycle shows that leasing becomes a more popular and attractive option when interest rates escalate,' he said. 'Even companies with substantial cash reserves discover there are better ways to use that cash than tying it up in depreciating assets such as IT equipment.

The recently released Equipment Leasing Association Monthly Leasing Index for September confirms Carcone's observation. The index shows that leasing new business volume increased 18.1 percent in September, the highest reported new business volume number of any month this year.

'Leasing provides fixed, scheduled payments to simplify expense budgets and provides a hedge against rising interest rates,' said Carcone. 'This tactic both protects businesses from inflation and allows them to project future cash outlays with greater accuracy.'

According to Carcone, leasing IT equipment can:

-- Conserve Capital. Leasing offers a low initial investment because large capital outlays are avoided and working capital is preserved.

-- Preserve Credit. Leasing IT equipment frees your line of credit for short-term operating capital or other unanticipated expenses.

-- Offer Flexibility. Leasing is flexible and can be structured for your company's particular needs. Payments may be set up to match your cash flow. Shipping, installation and other 'soft' costs may be included in your lease.

-- Refresh Technology. Leasing your equipment can help you keep up with technology. Your vendor can replace or upgrade equipment either mid-term or at the end of the lease.

-- Save Taxes. Qualified leases may allow payments to be written off for operating expenses, reducing short-term taxable income.

-- Simplify Procurement. Leasing simplifies IT procurement by eliminating worries about the logistics and liability issues of equipment disposal.

-- Bring Convenience. Simple application by phone or fax, fast decisions, and personal service will make leasing convenient.

'As with all aspects of IT acquisition and management, organizations make the decision to lease based on an evaluation of internal needs and circumstances as well as external economic factors such as interest rates,' adds Carcone."