Nortel Networks Corp.'s (NT) filing for bankruptcy protection could help competing network equipment providers gain new customers, but it also could hurt Nortel suppliers like Flextronics International Ltd. (FLEX) and Polycom Inc. (PLCM).

Although it's early to say, competing network equipment providers, most notably Motorola Inc. (MOT) and ShoreTel Inc. (SHOR), could benefit as some of Nortel's customers will likely look for more stable suppliers, analysts say.

Earlier Wednesday, Nortel said it is seeking creditor protection in Canada while some of its U.S. subsidiaries filed for Chapter 11 bankruptcy protection, citing a need to put itself "on a sound financial footing once and for all."

The struggling Toronto-based company said the global financial crisis and recession have severely hit its efforts to turn itself around, which have been going on since 2005.

Among larger telecommunications players that could gain, Motorola's mobile networking equipment unit held up rather well in 2008 compared to other parts of the company, said Todd Rosenbluth, telecomm analyst at Standard & Poor's Equity Research.

With that in mind, "we contend telecom carriers will shift spending to suppliers with relatively stable operations like Motorola" as contracts come up for renewal in the weak economy, Rosenbluth said.

Among smaller companies, Wedbush Morgan said ShoreTel Inc. (SHOR), a provider of Internet telephony hardware and software, could seize shares if Nortel is unable to hold on to its position as the third-largest enterprise voice equipment maker.

Shares of both companies fell Wednesday on a weak day for the overall market. Motorola slipped 3% to 4.19, while ShoreTel lost 7.3% to 4.06.

A Motorola spokesperson declined to comment and a ShoreTel representative was unavailable.

"There is still some near-term uncertainty," said Gartner analyst Mark Fabbi, as investors wait to see what Nortel's fate is and how its hopes to sell off some assets pans out.

And before some of the smaller players step up, Fabbi said, larger dominant companies will be able to hold on to their share first, highlighting Cisco Systems Inc.'s (CSCO) top position in the enterprise voice equipment market.

A Cisco spokesperson was not available to comment immediately. Shares of the company edged down 3.7% to 15.83.

On the flip side, suppliers to Nortel will likely take a knock. Shares of Flextronics shed 15% to 2.55 as the electronics manufacturing services company disclosed that Nortel was a major customer. In a release, Flextronics said it had been working to reduce its exposure to Nortel for "several months."

Elsewhere, the news could hurt Polycom, which was a "strategic global partner" with Nortel, Wedbush said. Still, the damage is expected to be marginal because Polycom already has similar partnerships with other industry leaders like Cisco and Avaya Inc. (AV).

A Polycom spokesperson was not immediately available to comment. Polycom stock dropped 4.6% to 13.78.

-By Kejal Vyas, Dow Jones Newswires; 201-938-5460, kejal.vyas@dowjones.com

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