VENDOR OUTLOOK CLOUDED BY WORLDCOM'S UNCERTAIN FATE

WorldCom's bankruptcy isn't likely to do any favors for equipment vendors, which are far down the list of companies owed money and probably won't get paid. Some are now facing the possibility that WorldCom won't emerge from bankruptcy.

It's an issue most vendors won't publicly address, but at least one said it believes the industry would be better off without WorldCom. The re-emergence of a debt-free WorldCom would be problematic for the remaining carriers who “played by the rules,” said Bob Sullebarger, director of marketing at Equipe Communications.

“The industry needs consolidation; it's just not necessarily going to spur equipment sales,” said Steve Coplan, lead analyst at The 451.

The bankruptcy already has dealt a blow to start-up vendors in WorldCom's labs. One of them, Allegro Networks, recently was forced to cut its work force in anticipation of not generating any WorldCom revenue, according to one source.

“It would be better for everyone if they were still around,” said Jim Lawrence, program director at Stratecast Partners, noting that vendor prices would be squeezed even more with fewer service providers in the market.

One vendor in the optical access space doesn't see WorldCom's re-emergence as an issue. “They have customers that need to be served, and I don't care if it's WorldCom or whomever,” said Jeff Gwynne, senior vice president of marketing at Quantum Bridge Communications.

In fact, the overall pie doesn't change because of WorldCom's problems, said John Gonsalves, vice president of Adventis. “Over the next six months, it really won't make much of a difference.”

WorldCom's demise isn't a bad signal for all vendors. Niche companies such as those that sell access equipment like edge routers are doing well regardless, Gonsalves said.

“There are some bright spots in optical access,” Gwynne added. “The ILECs are getting pressure from the MSOs and responding.”