First HP Enterprise, Now Cisco Systems — Can Delayed Payment Plans Keep the IT Industry Going>
Motley Fool – Anders Bylund
Networking equipment giant Cisco Systems (NASDAQ:CSCO) launched a $2.5 billion financing program on Tuesday. Under the so-called Business Resiliency Program (BRP), Cisco’s clients have access to an order financing option with very customer-friendly terms. This is an attempt to keep orders coming in during the novel coronavirus crisis, which is shutting down entire industries as governments and business leaders navigate these uncharted waters. But Cisco wasn’t the first IT titan to come up with a financing program specifically tailored for the COVID-19 era. HP Enterprise (NYSE:HPE) led the way with a slightly different $2 billion program last week. Are these industry veterans setting a new standard for the IT sector, triggering a deluge of delayed-payment programs in the wake of the coronavirus? The vendor financing arm Cisco Capital has earmarked $2.5 billion to fuel the BRP. The program is open to all of Cisco’s customers, from midmarket businesses to enterprise-class giants. The first payment under this plan gets a 90-day payment holiday and 95% of the total contract can be deferred to 2021. By contrast, HPE’s $2 billion Payment Relief Program defers over 90% of the client’s contract cost until 2021 by reducing the first 8 monthly payments to just 1% of the total order value. The monthly payments will then step up to 3.3% of the contract’s value per month, which works out to a 32-month contract length. Cash kings like software giant Microsoft (NASDAQ:MSFT) and database veteran Oracle (NYSE:ORCL) — holding cash reserves of $134 billion and $26 billion, respectively — should be first in line.
Link: https://www.fool.com/investing/2020/04/15/first-hp-enterprise-now-cisco-systems-can-delayed.aspx?source=iedfolrf0000001