Big coffers and lower costs
Some companies, such as Sycamore and Extreme, are cutting costs and laying off employees, exactly the conservative approach they have to take during the tough economic times, Wall Street analysts say. Despite the financial woes, analysts believe the young networking players can muddle through the economic downturn and stay independent because of their available cash.
"These franchises have staying power because of their technology," said analyst Chet White, of Wells Fargo Van Kaspar. "Juniper, Redback, Sycamore and Foundry all have decent balance sheets. They could burn through a couple hundred million dollars, but they have the staying power."
Some are in better financial shape than others. Despite seeing its third-quarter revenue fall by half, Sycamore has more than US$1 billion in cash and investments. Redback has about US$433 million, and Foundry has about US$252 million. Others, such as Copper Mountain and Extreme, have about US$160 million in cash.
"Every company has pristine balance sheets," said analyst B. Alexander Henderson, of Salomon Smith Barney. "Sycamore's got five years of cash flow. It will make it through the morass and could completely reinvent itself in two years."
The companies that are in financial danger--and ripe for acquisition--are the current crop of networking start-ups relying on venture capital funding, Henderson added.
