The computer  industry  is  believed to be one of the strongest

          financial markets, even secure enough to withstand the recessions

          which the  United States is experiencing.  Economists also agreed

          that even in the bad  times,  the computer industry has expanded.

          But the "abnormal events that have hit the United States in 1979"

          were  definitely  not  expected.[1]   The  1980  predictions  for

          increases in computer sales was  supposed  to be even better than

          that of  1979,  which was a "14.5% increase, but the industry has

          seen some dismal times as  of  late."[2] The demand for computers

          is now decreasing as a result of inflation.


            The cost of producing computers is increasing at a greater rate

          than "can be set off by technological innovations."[3]  In  order

          to survive the  increasing  costs, computer companies are raising

          the prices on computer  "maintenance  as  well  as  hardware  and

          software."[4]  Industry  analysts are now saying that the decline

          in prices which was typical  of  the computer industry has ended.

          The companies which specialize in mainframe computers will be the

          ones who are affected most by the economic slowdown.


            The decreasing  demand for mainframes will effect other aspects

          of the business world  as  well.   The  companies  which  produce


          ----------

          1. "Business Week"; May 12, 1980, p.  104

          2. "Business Week"; May 12, 1980, p.  104

          3. "Business Week"; March 31, 1980, p.  40

          4. Ibid, p.  40.



                                        - 1 -










          terminals that are hooked into the "mainframe computers"[5]  will

          also feel  the  effects  of  the  economic  slowdown.   The  high

          interest  rates  are  a  reason  for  the  decreased  growth   of

          computers.   The  vice-president   of   the   Digital   Equipment

          Corporation, Julius L. Marcus writes: "It's  not  a  question  of

          no-growth or  negative  growth  (for the industry), but may be of

          less growth than last year."[6]  The  computer  industry  is  not

          going to be ruined, it's just not  going  to be as good a year as

          was expected.


            The high  cost  to borrow money added to the inflation rate has

          been the  reason  for  the softening of the demand for computers.

          Also causing a decrease in the order  rates of computers has been

          the "shift in shipments from sales to leasing."[7]  The  interest

          rates have  affected  the  industry  dramatically.   The interest

          rates have skyrocketed from 14% to  20% in a very short period of

          time.  Hence,  the  small  business customer has not been able to

          buy computers which has consequently hurt  the  earnings  of  the

          large business  companies who produce the computers.  Leasing has

          become more popular as a result of the high interest rates.


            The  problems  which  leasing  creates  is  that the  company's

          earnings are slowed down.  Leasing spreads payments over a period


          ----------

          5. "Business Week"; January 11, 1982, p.  78.

          6. Ibid, p.  77.

          7. "Business Week"; May 12, 1980, p.  104.



                                        - 2 -










          of  time.   "In  the  month  in which it is sold,  one  purchased

          computer  can  generate  more  revenue  than  thirty-five  leased

          systems."[8]  reports vice-president  of  finance  and  planning,

          Dean  P.  Phypers of International Business  Machines(IBM).   The

          high interest rates which have been responsible for the switch to

          leasing have caused companies to move back the  delivery dates in