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Just weeks after a vow to tread more lightly on the lending front,

Cisco

(CSCO) - Get Cisco Systems, Inc. Report

is plunging into another financing deal with a local phone-and-data service start-up.

Looking Glass Networks

, a closely held Oak Brook, Ill.-based fiber-optic communications service provider, said Wednesday that Cisco will provide $100 million in vendor financing to help build its network in 25 major cities. The terms of Cisco's loans to Looking Glass weren't disclosed.

The deal is only the most recent lending commitment Cisco has made at a time when investors have taken a decidedly dim view of the prospects of would-be Baby Bell challengers. Stocks like

Teligent

(TLGT) - Get Teligent, Inc. Report

and

NorthPoint

have plunged over the past year as network-building costs spiraled and funding evaporated. The Looking Glass deal also underscores Cisco's continued reliance on its hefty cash reserves to help prop up customers who may be finding little love in the current capital markets.

Poster Boys

Cisco,

Nortel

(NT)

and

TheStreet Recommends

Lucent

(LU)

have become

the lifelines for telcos in a hostile market that has been unwilling to chip in much more money via telecom venture capital, equity or bonds.

And as a widespread spending slowdown has swatted networking shares to new 52-week lows, Wall Street has grown concerned about the willingness of the big equipment makers to take on risky debt. The fear is that the slowing economic environment has thrown cash-strapped service providers into the arms of growth-hungry equipment suppliers willing to part with loans to pump up sales.

Notably, Cisco's loans are part of a $275 million second round of financing for Looking Glass, which indicates a much earlier involvement than normal vendor financing deals and suggests that traditional venture and investment bank money was unavailable.

Similarly, Nortel, in October, rode to the rescue of meganetwork builder

Aerie

with a $500 million early-round financing deal, just as Aerie was about to come up short on its financing goals.

A Looking Glass spokeswoman declined to comment on Cisco's involvement but said the company was very happy to have Cisco's support. Looking Glass and Cisco are preparing a joint press release in which they're expected to outline how they will work together.

Cisco Kidding?

Cisco addressed investor concerns about vendor financing during its most recent earnings call last month. The company said it would be even more conservative than usual in its financing efforts.

"We said we would do less deals, but we didn't say we would do no deals any more," says a Cisco spokeswoman, declining to comment on the terms or the strategic value of the company's involvement with Looking Glass.

To date, Cisco says it has committed about $2 billion in vendor financing and that customers have taken $735 million of that.

Cisco has been very supportive of "last mile" and metro broadband start-ups, even at a time when investors are more inclined to flee. And Cisco's financing isn't always just for equipment purchases; often, though these deals are rarely disclosed, the cash goes toward working capital as well.

In November, Cisco

ponied up an added $50 million on top of the $75 million in loans it has extended to cash-starved

Rhythms NetConnections

(RTHM)

, a digital subscriber line, or DSL, provider. Last month, Cisco gave Canadian telco

Phonetime

a $1.25 million loan for operating capital and $250,000 for equipment financing.

Cisco is also

on tap to provide

Winstar Communications

(WCII)

with as much as half a billion dollars, as that service provider

grapples with its funding situation.

Conditioning

Looking Glass is building a series of metropolitan fiber-optic networks to wholesale both communications capacity and Web hosting services to office buildings.

Tom Lauria, equipment analyst with

ING Barings

, calls Cisco's move only slightly risky because it can set conditions on the loan that would require, as the Winstar deal specifies, that a borrower raise $2 worth of cash from stock sales for every dollar Cisco would lend. Lauria has a buy rating on Cisco, and ING Barings has done no underwriting for Cisco.

As Lauria points out, the limitation on Cisco's risk puts the networker in good position to ride out the bad times in the competitive local exchange, or CLEC, business and emerge stronger if these companies can survive and buy more networking gear.

"The CLEC's will probably come back, not this year, but in 2002," says Lauria. "At that point it could be very profitable for Cisco to be selling these companies their 'end-to-end' network solutions."

Then again, the seeds Cisco continues to spread over the seemingly infertile CLEC soil could simply wither away.