More challenges ahead?
Smith said Redback and Copper Mountain could face the toughest challenges because they focus on broadband access equipment, such as digital subscriber line connections. Many emerging DSL carriers that bought equipment, such as NorthPoint Communications, Jato Communications, and PSINet, are either out of business or struggling.
Though Foundry and Extreme have been hurt by the death of some dot-com customers and sluggish sales to emerging carriers, the pair sells equipment aimed at the Internet. So in the long term, the companies are in good shape because carriers will need to continue to build out their networks and make them faster, Smith said.
The same goes for Sycamore, which sells optical-networking equipment for large telecommunications networks that feed the Net appetites of businesses and consumers, he added.
Juniper has so far stayed on strong financial footing for the same reasons. The company, whose main competition is Cisco in the high-speed core router market, is in a good position because service providers need its products to build faster networks. The company also continues to steal market share from Cisco.
"Despite the spending concerns, service providers have to add capacity to ease the bottleneck, so the category is still growing," Henderson said of Juniper.
Juniper reports earnings for its latest quarter Thursday.
Even though service providers' spending is slowing, they will still buy new equipment, analysts said. As more emerging carriers go out of business, the remaining ones will pick up the slack and continue to spend because they need to continue to satiate the demand for network bandwidth and services, analysts say.
"Carriers will continue to spend if they are wise," Smith said. "They will be investing to improve their competitive position going forward and that suggests continuing to invest in new technologies."
