Light Reading

Vendor Financing Not in the Cards

Ray Le Maistre
10/16/2008
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Times might be tough, but there's no way that Nokia Corp. (NYSE: NOK) would contemplate reintroducing any vendor financing practices to help out cash-strapped customers, noted the vendor's CFO Rick Simonson during today's third-quarter earnings conference call. (See Nokia Reports Q3 and Nokia Siemens Shrinks in Q3.)

"I am not a bank," he stated, with some pride, in response to analyst questions about potential aid to carrier customers and channel partners.

Simonson noted that he was hired seven years ago at Nokia to "unwind the vendor financing" that had built up around network infrastructure deals, and he added that Nokia "won't go back to that model."

The CFO also noted that network operators are in a "situation where they have been in rude health [for a few years, with] envious EBITDA margins and good cash positions. Most operators are in pretty good shape." (See Optimism at Telefónica for example.)

That's not to say that Nokia isn't on its toes about the current macroeconomic climate. "We have our eyes wide open to what is happening out there," stated Nokia's CEO Olli-Pekka Kallasvuo. "We are doing our financial planning for next year and will be appropriately prudent" around operating expenditure, added the CEO.

Alcatel-Lucent (NYSE: ALU) is another company that's monitoring the impact of the global economic situation, but it too sees no return to the days of vendor financing.

Answering questions from Light Reading recently, the head of the vendor's Carrier Business Group, Michel Rahier, said, "It's no longer the same as 2000 or 2001 when we were financing deals -- no one is in that business anymore. But in a certain number of markets there are certain cashflow scenarios," where business processes might be slowed down by macroeconomic pressures.

AlcaLu reports its third-quarter numbers, the first for CEO Ben Verwaayen, on October 30.

— Ray Le Maistre, International News Editor, Light Reading

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Pete Baldwin
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Pete Baldwin,
User Rank: Light Beer
12/5/2012 | 3:29:23 PM
re: Vendor Financing Not in the Cards
well, at least they learned one thing from the last crash.

Or at least they say they did. Maybe there's room for some practice equally shady and equally dicey to emerge.
Mostly Harmless
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Mostly Harmless,
User Rank: Light Beer
12/5/2012 | 3:29:21 PM
re: Vendor Financing Not in the Cards
They often seem to use a VF model - especially for new customers.

Most experienced people know that VF makes about as much sense as a sub-prime mortgage. But if one vendor starts to use VF, it places huge pressure on all the other vendors. That's how the VF fiasco started 10 years ago. Herd mentality.

Today the herd is scared of VF because it bit them badly in the past. But Huawei doesn't have the same financial responsabilities as its competitors. They play by a different rule book.
DNA-Lorrd
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DNA-Lorrd,
User Rank: Light Beer
12/5/2012 | 3:29:15 PM
re: Vendor Financing Not in the Cards
I agree, ten years ago financing was relatively easy to come buy. Today the financial markets are pretty much frozen because of the credit crisis. Indeed, that may not apply to Huawei. I doubt Alcatel-Lucent, Nortel etc. would be able to get financing deals done. Huawei/Chinese, with backing from the Chinese government, would be the only ones.
acohn
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acohn,
User Rank: Light Sabre
12/5/2012 | 3:28:18 PM
re: Vendor Financing Not in the Cards
And dont forget the foreign corrupt practices act that Huawei need not worry about.

Kids Poppy has new laptops for everyone.
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