A handful of cash-rich companies are consolidating power in the technology industry, using their wealth to expand into new businesses and making it harder for small and midsize competitors to break through.

Why the industry is evolving this way is rooted in balance sheets. Over the past two years, Apple Inc., Oracle Corp., Google Inc., Microsoft Corp. and six other large tech companies have generated $68.5 billion in new cash, compared with just $13.5 billion for the other 65 tech companies in the S&P 500 Index combined, according to a Wall Street Journal analysis of data provided by Capital IQ.

The rich few are funding investments at a time when many others have retrenched. Over the past year, Oracle paid $7.4 billion to get into the hardware business by acquiring Sun Microsystems, and Dell Inc. bought Perot Systems to add technology services. Cisco Systems Inc. spent more than $7 billion to acquire six companies.

Frank Calderoni, Cisco's chief financial officer, says the company's balance sheet 'is a major competitive advantage for us.'

Google, meanwhile, has tapped its savings to fund moves into computer operating systems and mobile phones. Microsoft has financed its money-losing quest to take on Google in search with its cash. And Apple has used its reserves to develop the iPad and take aim at Google recently by acquiring a mobile-advertising company.

Because of their massive cash accumulation, these companies can afford to take risks that smaller companies can't at a time when the economy remains fragile. The result is a bifurcated tech landscape, says Erik Brynjolfsson, a professor at the Massachusetts Institute of Technology's Sloan School of Management.

'Cash has become king to an even greater extent than in the past because of the credit crunch,' he says. 'A company with a lot of cash is in a disproportionately strong position now than it would be in normal times.'

The repercussions from the cash discrepancy are being felt throughout the industry. Some midsize tech companies are giving up trying to compete with their larger rivals.

'I'm not going to fight' being a mid-tier company, says Enrique Salem, chief executive of security-software maker Symantec Corp., which has annual revenue of $6.1 billion and cash reserves of $2.6 billion. 'It's a losing proposition for me to try to catch up with Oracle,' which had $20.8 billion in cash at the end of November.

Others are gearing up to make their own acquisitions so as not to be left behind. For example, online-software maker Salesforce.com Inc. nearly doubled its cash reserves in January by taking on $575 million in debt that it says it will use in part for future expansion and acquisitions. Other midsize tech companies, such as Ciena Corp., have recently scooped up smaller rivals to bulk up.

The concentration of cash taking place in tech isn't happening in other sectors.

From the end of 2007 to the end of 2009, the 10 richest tech companies increased their cash levels by 48% to $210 billion. The other 65 tech companies listed in the S&P 500 upped their cash only 13% in the same period, to $118 billion.

The upshot: The gap between the two groups stood at a record. The gap would be even larger, except an accounting change caused Apple to designate about $10 billion of its holdings as long-term investments.