OT Technology News
Thu, 30 Mar 2000, 12:32am EST
Cabletron Fourth-Quarter Profit Soars
Sevenfold; 600 to 800 Jobs to Be Cut
By Scott Lanman
Cabletron 4th-Qtr Profit Rises 7-Fold on Sales
Jump (Update4)
(Adds analyst comment in fourth paragraph.)
Rochester, New Hampshire, March 29
(Bloomberg) -- Cabletron
Systems Inc. said fiscal fourth-quarter profit rose
sevenfold and
it plans to cut as many as 800 jobs, or 18 percent
of the payroll,
as the networking-equipment maker exits older
businesses prior to
its planned split into four companies.
Profit from operations in the quarter ended Feb.
29 rose to
$28.1 million, or 15 cents a share, from $3.8
million, or 2 cents.
Revenue increased 11 percent to a record
$381.8 million, the
highest quarterly revenue in three years, from
$345.1 million.
Cabletron, which has begun to rebound with newer
data-traffic
routers and services, announced plans last month
to split into
four separate units and sell shares in each. On a
conference call
today, the company set more reorganization
plans, including the
elimination of 600 to 800 jobs in older businesses
that it's
trying to sell.
``They're all good moves,' said William Becklean,
a SunTrust
Equitable Securities analyst who rates Cabletron
a ``strong buy.'
The moves will ``refocus the company on the good
pieces of
business,' he said.
Cabletron was expected to have profit from
operations of 14
cents a share, the average estimate of analysts
polled by First
Call/Thomson Financial.
Shares of Rochester, New Hampshire-based
Cabletron fell 2 3/4
to 47 3/4 on the New York Stock Exchange. The
company released
results after the close of U.S. markets.
Cabletron shares have risen more than fivefold in
the past
year. They're up 48 percent since the Feb. 10
announcement that
the company would divide itself.
Selling Businesses
Chief Financial Officer David Kirkpatrick said
Cabletron is
close to selling two businesses: the Digital
Equipment Corp.
network-equipment business bought in February
1998 for $439.5
million, and switch maker NetVantage, which
Cabletron bought in
September 1998 for about $77.8 million.
Cabletron expects to complete the sale of the
businesses
within 90 days, Kirkpatrick said. The company and
investment
bankers are in talks with potential buyers, Chief
Executive Piyush
Patel said. Cabletron hopes the buyers will retain
the employees.
The moves will shrink Cabletron's revenue by
about $100
million to $130 million a quarter, or by 25 to 35
percent,
Kirkpatrick said. Cabletron expects to take pretax
charges
totaling $25 million to $35 million in its fiscal first
quarter to
cover severance and facilities costs.
``The go-forward business model will be a leaner,
faster-
growing Cabletron,' Kirkpatrick said on the
conference call.
Cabletron expects to make up some of the job
cuts as the
newly formed units hire more employees.
Compaq Computer Corp., which bought Digital in
1998, is
paying Cabletron $123 million to end an
agreement under which
Compaq was required to buy a certain amount of
Cabletron gear each
quarter. The original $1.1 billion, 3 1/2-year
required-purchase
agreement stemmed from Cabletron's acquisition
of Digital's
networking business.
``These are very old products, probably seven to
10-year-old
product lines,' Chief Executive Piyush Patel said
in an
interview.
Cabletron's moves come nine days after rival
3Com Corp.
unveiled plans to cut half its revenue and up to a
fourth of its
workforce as it exits slower-growing product lines.
quote.bloomberg.com |
