While prices may be falling for technology M&A targets, so far the sky isn't.

According to data from FactSet Mergerstat LLC of Santa Monica, Calif., overall deal value in the so-called computer software, supplies and services sector tripled to $74 billion in the first quarter of 2008 versus $25 billion in the first quarter of 2007 and $36 billion in the fourth quarter of 2007. That figure includes the $41.4 billion offer Microsoft Corp. made for Yahoo! Inc. in February.

Omitting that deal, in which the two companies have not yet reached a definitive agreement, the total drops to $33 billion, still above the first-quarter 2007 figure and only slightly below the fourth-quarter number.

Don More, a partner with M&A advisory shop Updata Advisors, which analyzed the FactSet Mergerstat numbers, said the data supports what his firm is seeing in the marketplace.

"We are continuing to see strength in technology M&A both in terms of deal volume and buyer interest," said More, whose firm typically serves as a sell-side adviser of middle-market companies. "We still have a strong transactional pipeline. We've not seen direct impact from the economic uncertainty yet."

More said many Internet-focused areas, such as online advertising targeting, software-as-a-service (SaaS) companies and those with e-commerce technologies, continue to fare well, albeit with some reduction in valuations.

"It's a little like the real estate market in that the sellers are taking some time to recognize that there's been some changes in the market," he said. "However, we have seen increasing willingness of sellers to take certainty of a deal over getting every last dollar in a deal, but it's taking time."

Helping things out were a number of large deals announced during the quarter. In addition to the proposed Microsoft-­Yahoo! merger, there were eight other deals greater than $1 billion, including Oracle Corp.'s $7.2 billion acquisition of enterprise application software maker BEA Systems Inc., and Reed Elsevier Group plc's $4 billion acquisition of business services company ChoicePoint Inc.

Among the eight is another deal in which the two sides have yet to reach common ground, video game maker Electronic Arts Inc.'s proposed $1.9 billion acquisition of rival Take Two Interactive Software Inc. One area off to a slow start is security software.

According to New York-based Updata, there were only 13 security software transactions in the first quarter for a total deal value of $213 million compared with 19 in the first quarter of 2007 for an aggregate $1.5 billion. But More said it's too early to write off this sector.

"Security's a very lumpy M&A market," he said. "On average, the five top deals size-wise represent more than 70% of the M&A volume, so one big deal could put the volume back on track."

Another investment banker, who asked not to be identified, said his firm also continues to see a lot of activity even though the dynamics are changing as companies adjust to new, lower valuations.

"It's a difficult time for any board [of directors] to get comfortable selling at this time," he said. "That said, there's a lot going on. It's not as slow as you would think reading all the literature."

More said he expects 2008 to be a "respectable" year for tech M&A, with volumes in the midmarket similar to last year.

"There are still huge pools of capital looking to invest," he said. "For companies that are growing well and are profitable, the demand is no less strong than last year.

"What's being impacted are companies that are borderline, that may not be profitable, that lack scale. Last year they may have gotten sold. This year they're taking longer and there may be more price pressure," he added.

According to FactSet Mergerstat, total announced global M&A deal value was $421 billion in the first quarter, down 32% from the fourth quarter in 2007 and 25% from the fourth quarter.-- David Shabelman