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Caveat Vendor
More bad news for the telecom sector came to light with the revelation that telecom-equipment suppliers had fueled some of their meteoric growth by extending finance to high-tech and telecom start-ups that are now having difficulty meeting their payments or, like Winstar Communications, have spectacularly collapsed. Not that the problem is confined to the telecom sector. Xerox, for example, is struggling under the burden of $11 billion in debt it borrowed to help customers purchase its products.
The take-away: How can vendors protect themselves in the future? It probably isn't necessary for them to drop the practice of financing their sales, but they will need to scrutinize borrowers more closely and to adopt better risk-management techniques.
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