Board-Ansicht
Mix-Ansicht- Die ersten Dominosteine fallen. Cisco et al kriegen ihre Darlehen nicht zurück - Rumpelstilzchen, 24.11.2000, 16:53
- Re: Die ersten Dominosteine fallen. Cisco et al.../Danke für die Geschichte.... - JüKü, 24.11.2000, 18:00
Die ersten Dominosteine fallen. Cisco et al kriegen ihre Darlehen nicht zurück
Eine weitere märchenhafte Geschichte.
Diesmal aus dem Wallstreet-Journal.
Habe sie hierher kopiert, da man sich bei WSJ.com registrieren muss.
Wer sich die Mühe macht den Artikel zu lesen, wird erfahren, wie unsere High-Techs nicht nur ihre teuren Geräte verkaufen, sondern auch gleich die Kohle für die Geräte mitliefern. Bei Lucent machte das 5% des Umsatz aus.
War sicher gut für die Umsätze in den früheren Quartalen.
Aber jetzt scheinen mehr und mehr Schuldner auszufallen.
[b]"The bad news so far is the tip of the iceberg"[b]
Tech Equipment Makers
Confront Bad-Debt Risk
By JONATHAN WEIL, ROBERT MCGOUGH, SHAWN YOUNG and SCOTT THURM
Staff Reporters of THE WALL STREET JOURNAL
With customers like these, who needs enemies?
Upstart telecom and dot-com companies are bleeding cash with few means to replenish it, sending a shock wave through the ranks of companies that sell equipment to them.
Lucent Technologies sharply boosted its reserves for bad debt in the fiscal quarter ended Sept. 30. Equipment maker Ciena wrote off $28.2 million, or about 13% of its total accounts receivable, after troubles collecting from a British telecom company. ICG Communications, meanwhile, filed for bankruptcy-court protection last week, listing equipment makers such as Lucent and Cisco Systems as creditors.
And it is only going to get worse, some on Wall Street say. The reason: High-tech equipment makers world-wide are exposed to the problems of the fledgling companies like never before; not only must they worry about slowing sales, they also must worry about collecting on their earlier sales, some of which were financed by loans extended by the equipment makers themselves.
Lucent Technologies has been a leader in this category, with about 5% of its sales last year coming from transactions it financed. The company's commitments to customers skyrocketed to $7 billion as of Sept. 30, of which about $1.6 billion is actually loaned, from $2.3 billion in commitments in September 1998. Rival financiers include Nortel Networks, which announced this week it would boost its financing for customer purchases to more than $2 billion by the end of next year, up from $1.1 billion at the end of 2000. Other lenders: Alcatel, Cisco Systems, Motorola and Qualcomm.
Until recently, investors were drooling over the incredible sales growth posted by most of these big telecom-equipment makers. But investors increasingly are realizing the role that loans to customers have played in revving up revenue, and they now fear that some financed sales may generate little if any actual cash because the customers may be deadbeats.
"We've only started to scratch the surface right now," says Romeo Reyes, a high-yield telecom analyst for Jefferies & Co. in Stamford, Conn. While ICG Communications is one of the first start-up phone carriers to seek bankruptcy-court protection, he anticipates at least a half-dozen others during the next year."I can't imagine that next year, as certain emerging service providers face financial difficulties, that there won't be additional equipment suppliers with potential bad-debt problems."
All this is coming to a head because the capital markets essentially quit funding these nascent telecom and dot-com companies a few months back, following the burst of the Internet bubble. The start-ups had counted on being able to tap the public stock and bond markets to finance their capital spending. With those avenues now closed, the big equipment makers may soon stand as the lenders of last resort.
And that leaves the suppliers facing a dilemma more common to banks with problem borrowers: Loaning a struggling customer more money might forestall a default, but it creates the risk of bigger losses down the road, as well as added scrutiny from creditors and shareholders. On the other hand, cutting that customer off could cause a default sooner rather than later. And that would mean write-offs and reduced earnings. The bottom line: Protracted weakness in the Internet and telecom sectors could create an acceleration of casualties.
The bad news so far"is the tip of the iceberg," says James Gipson, manager of Clipper Fund. He cites Sanford C. Bernstein data showing that, in the first six months of this year, some 41 publicly traded telecom-service companies had cumulative negative cash flow of $19 billion, reflecting their heavy spending on New Economy infrastructure. By comparison, they collectively held only $34 million in cash and cash equivalents as of June 30.
Under Old Economy rules, the start-up telecom and dot-com companies likely would have never been funded to begin with. But the big suppliers have actually tripped over themselves to lend them money to buy their products, sometimes on very generous terms."It was so competitive to get those deals," says Jefferies' Mr. Reyes. So-called vendor financing"is one of those excesses you see in every bull market." Adds Ann Miletti, a money manager at Strong Funds who follow wireless stocks,"It's all a game. How much more are you willing to give to get the order?"
How generous? A study by Cecilia Wagner Ricci, a finance professor at New Jersey's Montclair State University, cites this 1996 deal disclosed in Lucent's annual report: no principal payments for four years, and quarterly interest payments deferrable for two years at the discretion of the customer, the company now known as Sprint PCS. All told, Sprint could take as long as nine years to pay back the loan.
Lucent says it sold the loan within two years and that it is no longer on its books. The big vendors often do resell the loans, although as Nortel noted in its latest quarterly filing with the Securities and Exchange Commission, market conditions are making it more difficult to peddle these loans quickly.
For investors, the risks posed by vendor financing can be hard to quantify. Ms. Ricci notes that some equipment makers include vendor financing totals in their short-term accounts receivable while others lump them into long-term assets; some do both.
When equipment companies do provide details, they are usually in footnotes. Where vendors guarantee customer loans, rather than make them directly, some companies disclose nothing. What about customer loans that go bad? Companies typically fold bad-debt expenses into overall general and administrative expenses, with no breakout."There isn't a lot of disclosure," Ms. Ricci says.
Still, the issue has been on the radar screen of investors since late spring, when GST Telecommunications filed for bankruptcy-court protection. Concern spiked in September, when Lucent briefly tried to sell some of the loans it had extended to Winstar Communications. Junk-bond investors got spooked: Lucent was offering the loans at less than 90 cents of the dollar, investors say. Lucent ended up not selling the debt and continues to hold it.
Even as the high-yield debt market is nervous about companies such as Winstar, the broadband-services company this month announced it has landed more than $1 billion in new equity and debt financing, including $250 million in vendor financing from Cisco, the first such deal for the maker of Internet-switching equipment with Winstar. Winstar hopes that infusion, about 75% of which is debt, will keep it funded through 2002.
For its part, Cisco is trying to boost sales to telecom carriers with aggressive financing. In a Nov. 6 conference call, Chief Financial Officer Larry Carter told Wall Street analysts that the San Jose, Calif., company has committed to $2.4 billion in financing deals since creating its financing arm in 1996. Roughly one-fourth of those commitments came in the fiscal first quarter ended Oct. 28, accounting for almost 10% of Cisco's $6.52 billion in revenue for the period, he said.
Cisco executives say -- and outside analysts who have looked at the issue agree -- that Cisco accounts for these deals in a very conservative manner that makes the company less susceptible to the problems others have experienced. For example, Cisco doesn't record revenue on financed equipment sales until the products are shipped and the payments received.
But Cisco may face another problem: continued reliance on financing to maintain its closely watched sales-growth rate. Mr. Carter said Cisco considers financing"an integral part" of its business, and would continue extending credit. The same day, for example, Cisco said Cambrian Communications, a Fairfax, Va., upstart carrier, had agreed to buy $150 million of its gear. Neither side would discuss financing, but Cambrian has reported raising only $11 million to date, suggesting that at least some Cisco financing is involved.
Computer makers, among others, also could face a wave of bad debts from failing dot-coms. Last week, for example, Hewlett-Packard said it missed analysts' estimates for fiscal fourth-quarter earnings in part because it set aside $20 million more than expected to cover bad debts, primarily from dot-coms.
HP won't disclose its total financing commitments or how much it typically sets aside for bad debts. HP Chief Executive Carly Fiorina told analysts"there is some continued exposure" to bad debts from struggling dot-coms and"we're watching it very carefully." David Havlek, a manager in HP's investor-relations department, says the Palo Alto, Calif., computer maker has taken steps to reduce its financing risks, by lowering the maximum size for a single deal, requiring more approvals of each deal and changing management of the financing unit.
At Motorola, Chief Financial Officer Carl F. Koenemann confirms that vendor financing is on the rise at the Schaumburg, Ill., communications-equipment concern. He says Motorola has to act"like a bank" when determining to whom it lends."As long as you're making sound judgments, you can grow with your customers."
Like banks, it gets harder for the telecom-equipment makers to turn down loans to a customer who already owes money, says Bob Konefal, a managing director at Moody's Investors Service."When they've already got some capital at risk, the prospect is greater for them to put more in." With credit ratings hanging in the balance, he adds,"we're watching like hawks for dramatic increases in the financing portfolios."
-- Mark Heinzl and Nicole Harris contributed to this article.
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