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Cabletron does OK amid networking gloom

Holds its head above water

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Networking and telecoms outfit Cabletron Systems has surfed over the sea of despond afflicting its competitors by meeting industry expectations with its first quarter results.

Cabletron, which these days exists as a holding company for four businesses, yesterday announced combined revenues of its four subsidiaries at $311 million, compared to $217 million in the same quarter last year. It reported sales of $291 million in its previous quarter.

On these figures, Cabletron's net income was $9.8 million for its first quarter.

Hardly reason to dance in the streets of Rochester, New Hampshire (the loci of Cabletron's endeavours) - but compared to the performance of Cisco, Nortel and Lucent of late - it's a result in every sense of the word.

The encouraging figures have prompted Cabletron to announce it expects to complete the spin-out by mid-August of its Riverstone Networks unit, which markets Metropolitan Area Networking kit to service providers (incidentally something due to happen last year, but let's not quibble here).

Cabletron's renewed and aggressive timetable calls for the float of its enterprise networking subsidiary, Enterasys Networks (by far its largest revenue earner), immediately after this.

Aprisma Management Technologies, which sells Spectrum network management software, will be spun out of Cabletron, with (if plans pan out) an offer to Cabletron shareholders. This is expected to happen by the end of the year.

Joker in the pack, GNTS, is up for sale or disposition by its parent firm, with an announcement due by 16 July.

Cabletron, long considered the Rolls-Royce of networking, with clients like NATO, the BBC and err... Rolls-Royce, weathered a decline in fortunes for much of the last three years even while its competitors were enjoying boom times. Essentially it relied too heavily on hubs for its revenues while the market migrated to LAN switches, and as arch-enemy Cisco Systems tried to pitch its kit against circuit switched technology - which telcos know and trust.

Now Cabletron, perhaps inadvertently, is reaping the benefits of a later and more conservative entry into the telecoms market. It's also got a smart cookie at the helm these days in the shape of chief executive, Payush Patel.

The collapse of competitive carriers in the States, who had data centres full of part-paid Cisco and Lucent kit, has had a monstrous effect of those former darlings of Wall Street, as a slowdown in IT spending in general has piled on the misery.

Cabletron and emergent firms, most notably Juniper Networks, have held their head above water as Cisco et al have shed staff and trimmed sales and earnings forecasts. ®

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