The Dot Com Bubble

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The Dot Com Bubble

By | Jan. 2013
Page 1 of 12
By Jesse Colombo
The Dot-com Bubble or the Tech Bubble was a speculative bubble in the shares of early internet companies called “Dot-coms.” Soon after the 1987 stock market crash, global stock markets resumed their previous bull market trend, led by computer and other technology-related stocks that were traded on the new electronic NASDAQ stock exchange. By the early 1990s, personal computers were becoming increasingly common for both business and personal use. Now that computers were finally becoming reasonably priced and relatively user-friendly, they were no longer relegated to being the domain of geeky hobbyists. Personal computers had become genuinely useful business tools that granted their users a significant boost in productivity. Business applications were invented to help users with a variety of tasks from accounting to tax preparation to word processing. Computers also began to compete with television as a form of entertainment as PC video games entered the marketplace. The operating system company Microsoft prospered enormously as almost every computer system sold had their software installed on it. During the 1990s, the U.S. computer industry decided to focus primarily upon computer software development instead of designing and manufacturing computer hardware. The reason for this focus was because computer software was a product with very high profit margins, unlike computer hardware. Software companies generated profits by selling licensed software, which costs very little to reproduce. Computer hardware, however, was rapidly becoming a commodity product or a product that is virtually indistinguishable from the product of any other competitor, which forces companies that are manufacturing such products to strongly compete on price. Asian companies, with their low manufacturing costs, produced virtually all computer hardware components by the 1990s. Software, however, was protected as intellectual property with patents, which created a strong...