Tech Spenders Turn Choosy

SAN FRANCISCO -- When money is tight, consumers forego hamburgers for Hamburger Helper.

But how do companies adapt?

Wall Street has spent the past few months busily cranking out reports explaining why corporations will continue spending their money buying new computers and networking gear during a recession -- or predicting the opposite.

For tech firms, whose fortunes depend on the shopping habits of corporate customers, the latest batch of earnings reports has done little to clear up the matter, with some firms thriving and others blaming sluggish sales on a weak economy.

One trend not getting as much attention, however, may be the most obvious: Rather than freezing tech spending outright, and putting new projects on ice, companies may simply be bargain-hunting.

Consider CiscoCSCO, the world's No.1 maker of networking equipment, which has sounded the alarm about a slowdown in corporate spending during its two past quarterly earnings calls, and which will provide another highly anticipated update when it reports its fiscal third-quarter results after Tuesday's market close.

Many investors have interpreted Cisco's comments as a sign that corporate wallets are snapping shut. After all, whatever happens to Cisco, which controls more than 70% of the market's routers and switches, is probably a reliable reflection of what's occurring across the market.

In fact, the answer may be more complicated.

As the dominant player in the sector, Cisco charges a sharp premium for its products. In many instances, the price for a Cisco offering can be more than double what a competitor is selling.