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Now is a good time to buy, but beware network kit 'bargains'

Antony Adshead
Buyers of network equipment should check the financial health of suppliers offering huge discounts, industry experts have warned.

Bobby Johnson, chief executive at Foundry Networks, said fierce competition was forcing financially troubled firms to offer massive discounts in a last-ditch bid to win business. "We often arrive at the latter stages of a deal only to find competitors - some on their deathbeds - offering discounts of 75%," he said.

Plummeting demand and the recent rocky fortunes of the networking industry have forced some firms into offering users huge discounts.

Although the network industry has not yet seen the collapse of suppliers on the scale of WorldCom in the carrier market, the sector has been hit by plunging share prices and widespread redundancies.

Analysts believe many suppliers are in a financially precarious position and could go to the wall, leaving users stranded. They have warned against leaping at apparent bargain buys.

Gartner analyst Ian Keene said, "It is a buyers' market more than in 2001 and people should take advantage, although they should still only buy as appropriate for the needs of the business."

Keene said IT departments could take advantage of troubled network supplier "distress sales" by purchasing equipment to fill short-term needs, but not kit forming part of long-term strategic plans. "If you need to just buy a box to do a job then buying at huge discounts from troubled suppliers is not a problem, but it is a problem if you are buying strategically and will need support in the future," he said.

Pete Smith, corporate IT manager at satellite telco Inmarsat, said, "There are huge discounts being offered for all sorts of equipment.

"It is not such a problem when it is the middleman offering them, but alarm bells should ring when it is a manufacturer. You know they are not going to be making sufficient profit and wonder if they will be around next year, when you need support."

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