The Nortel Effect: Who Wins, Who Loses

Nortel Networks Corporation(NT Quote) bankruptcy filing could have major implications for the other tech stocks as investors weigh the impact of the equipment manufacturer's ongoing struggles.

Despite Nortel's promise to continue its day-to-day operations without interruption, networking rivals Cisco(CSCO Quote), Alcatel-Lucent(ALU Quote) and Motorola(MOT Quote) are likely looking to benefit from the Canadian company's Chapter 11 filing.

Nortel's Rivals

With Nortel embroiled in sorting out its problems, firms such as Cisco will be eyeing the equipment maker's customers, according to Henry Dewing, principal analyst at technology research firm Forrester.

"There will be some fear, uncertainty and doubt about [Nortel], and there will be other vendors, in each of their markets, that make hay with that," he says. "I think that you will see some of the folks across the tech sector talking about the difficulties that Nortel is having and saying that 'you can't count on their future'."

Cisco, of course, is facing challenges of its own, making Nortel's customers an increasingly attractive target. The tech bellwether recently sent shockwaves through the industry when it forecast a weak second quarter amid tight enterprise and service provider budgets.

The networking arena, like many other parts of the IT market, looks set to become more competitive in 2009 as firms fight for shrinking budgets. Forrester, for example, recently predicted that users' investment in communications equipment will decline during the coming months.

Purchases of routers, switches, private branch exchanges (PBXs), videoconferencing equipment, and unified communications equipment will fall to $353 billion, it said, a 3 percent decline from $364 billion in 2008.

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