Cabletron Shares Fall as 3rd-Qtr Profit to Disappoint
Rochester, New Hampshire, Dec. 2 (Bloomberg) -- Cabletron
Systems Inc. shares fell as much as 28 percent after the computer-
networking equipment company said fiscal third-quarter results
will be disappointing because orders didn't meet expectations.
Cabletron also said it will take a fourth-quarter pretax
charge of $25 million to $30 million to restructure its business.
''They are losing market share and competitive position,''
said analyst Andy Schopick of Nutmeg Securities, who rates the
stock ''long-term buy.''
Analysts and investors said Cabletron is lagging in shifting
to new, faster technology for sending data around and between
networks, and is being hurt by uncertainty about its future
because of management changes and acquisitions.
Cabletron shares fell 6 5/16 to 16 7/8 in midday trading of
6.59 million, making it the fourth-most actively traded stock on
U.S. markets. It traded as low as 16 3/4.
The charge will help pay for costs related to duplicate
facilities and to write off the value of assets, Rochester, New
Hampshire-based Cabletron said in a statement. It said it expects
to be ''more active'' in forming partnerships and making
acquisitions.
The announcements come just a week after Cabletron agreed to
buy the networking unit of Digital Equipment Corp. for $430
million in an effort to bolster its product offerings to better
compete against rivals Cisco Systems Inc., 3Com Corp. and Bay
Networks Inc.
''It's very competitive out there,'' said Phil Schettewi,
managing partner at Loomis Sayles & Co., which owns Cabletron
stock. ''The strong get stronger, and Cisco certainly isn't
having problems.''
Still, Schettewi said he would consider buying Cabletron
stock at this level because he thinks the company will start to
recover next year. Schopick agreed that the stock is ''cheap''
right now and said products introduced in the past year will
start to spur sales next year.
Cabletron said profit in the quarter ended Sunday will be 8
cents to 12 cents a share, well below the average estimate of 40
cents 24 analysts surveyed by IBES International Inc. In the year-
earlier quarter, Cabletron earned $69 million, or 46 cents a
share, on sales of $361 million.
Cabletron blamed the forecast on an ''order shortfall,
weakness in some domestic segments and delayed Federal government
decisions.'' It wasn't more specific.
Cabletron said it expects to report sales of $330 million to
$340 million. Profit margins are expected to be narrower, the
company said. Cabletron didn't say whether it will reduce its
payroll of 6,800 employees.
Cabletron is to disclose third-quarter results Dec. 22.
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