Financiers, Equipment Vendors Keep Funds Flowing

October 2008 marked the worst month for Wall Street in 21 years. In the third quarter, gross domestic product output fell .3 percent, according to U.S. Bureau of Economic Analysis statistics (two consecutive quarters of negative GDP growth mean recession). Add in The Conference Board’s consumer confidence index ranking, which dropped to an all-time low, from 61.4 in September to 38 in October, plus thousands of layoffs from companies including Whirlpool Corp. (WHR), Motorola Inc. (MOT) and Circuit City (CC). On top of that, banks have put the kibosh on lending, making financing difficult even for the strongest businesses. Put it all together and America faces the nastiest economy in 30-plus years, almost to the level of the Great Depression.

Bummed out yet?

Well, if you’re a telecom gear reseller, don’t be. End users, in a quest to reduce communications spending, are shunning TDM in favor of IP technologies; resellers are the experts installing the new equipment and tweaking existing networks. And while banks have retreated from free-for-all lending, telecom equipment manufacturers and industry-only bankrollers say they’re flush with money. Indeed, companies including Cisco Systems Inc. (CSCO), Avaya Inc., Westcon Group and Thermo Credit LLC, in these tight times, are reporting doling out even more money to businesses and channel partners. Several additional high-profile channel companies refused interviews with PHONE+.

Yet one wonders how telecom vendors, distributors and others can buck economic trends that have dragged down nearly every other sector. The answer, companies say, is that they never veered from conservative fiscal standards. Even as other investors and lenders ran amuck, they continued to scrutinize applicants. As a result, businesses including Avaya and Westcon Group maintained strong relationships with their creditors, built up stores of cash and now can provide loans when banks cannot or will not.

And lest that information strike you as concocted, given the dismal economy, independent association Technology Assurance Group (TAG National) confirmed that, yes, what telecom distributors and equipment makers are saying is true.

“I’m not seeing a financial credit meltdown in our industry at all,” said TAG National co-founder Dale Stein. “I’ve not had one manufacturer say, ‘We’re rearranging our credit terms [for the worse]’.” All equipment makers have done, he added, “is make more capital available.”

To be sure, suppliers and financiers are rearranging their credit terms and offering short-term incentives.

For example, Cisco Capital is furnishing 0 percent, 36 months same-as-cash terms for Cisco Systems’ unified communications platforms through Jan. 24, 2009. Buyers spread out the payments with no interest charges and, at the end of the lease, own the equipment, according to an Oct. 6 promotional e-mail obtained by PHONE+.

Cisco Capital declined to speak with PHONE+ but did provide a written statement. “The strength of Cisco’s balance sheet allows Cisco Capital to operate and drive incremental sales by providing innovative, flexible financing options to Cisco customers and channel partners worldwide. We continue to be conservative in the lending practices, the accounting treatments and the revenue recognition of our financing activities.”