Funding Crunch Threatens Winstar, Networking Backers

Winstar Communications (WCII Quote) says it is so close to completing its network and achieving cash-flow breakeven that it can practically smell it. But some noses on Wall Street are smelling something distinctly less pleasant.

In Tuesday's bullish fourth-quarter earnings report, the local phone and data service provider said it has enough cash to get through the year. But considering the unfriendliness of the debt and equity markets and recent market chatter about funding worries, Winstar's outlook is far from rosy, some observers say. Now, with big telecom gear makers like Lucent (LU Quote) and Cisco (CSCO Quote) increasingly appearing to be the last salvation of capital-intensive network builders like Winstar, shareholders of those networking giants may find themselves increasingly uncomfortable as well.

Winstar shares rallied $1.31, or 11%, Tuesday to $13.12. Amid a sharp downdraft in the telecom-equipment sector, Lucent dropped 48 cents to $12.11 and Cisco slipped $2.06 to $24.

Hungry Like the Wolf

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