Riechers,
Oversimplification? Hardly. You want to risk 100% to gain 10% profit?
Have you heard of Iaxis, or any other of the startups going belly up? These start-up firms are Sycamore's bread and butter. Some have credit problems as they are making no money. So why would anyone in their right mind lend to them, or advance credit for material purposes. Many companies have a credit department that evalutes the risk of doing business with customers, even on net 30 days.
Fortunately, Ciena has not fallen for the gambit of vendor financing, but I do understand that the company will have a third party take the credit risk, if vendor finanacing is the critical deciding factor with a contract win.
Vendor financing is a shakey business practice that is pursued by those companies that are weak in techical or marketing strength, or execution.
Insofar as a slowdown in capex due to revenue slowdowns, I am sure that is for real. But the cuts will come from the fat in the budget, new aircraft, SONET gear etc, with no slowdown in DWDM and optical switching.
The telecoms for the most part are flush with cash. So why would it be necessary to advance credit in the form of vendor financing? See above.
Jack Hutchison |
