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

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 with other parts of the company, said Todd Rosenbluth, a telecommunications 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.

A Motorola spokesperson declined to comment.

In the small-cap telecom arena, Wedbush Morgan said ShoreTel, a provider of Internet telephony hardware and software, could seize market shares if Nortel is unable to hold on to its position as the third-largest enterprise voice-equipment maker.

Nortel's announcement is a reminder of the difficulties that lie ahead for traditionally top-tier telecom names, said ShoreTel Chief Executive John W. Combs, calling it "a milestone." A shift toward newer technologies has hit telecom giants, with many now having to spend money to keep up, Combs said, adding that his company is strategically positioned to gain.

While both companies may stand to gain, their shares fell Wednesday on a weak day for the overall market. Motorola slipped 3.7% to 4.16, while ShoreTel lost 6.4% to 4.10.

"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 pan 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 wasn't immediately available to comment. 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 11% to 2.66 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 wasn't immediately available to comment. Polycom's stock dropped 3.5% to 13.93 a share.

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

Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary. You can use this link on the day this article is published and the following day.