Cabletron tumbles after earnings warning
December 3, 1998 10:51 AM
By Jennifer Shaw
NEW YORK, Dec 3 (Reuters) - Cabletron Systems Inc. shares lost about quarter of their value in early trading Thursday after the company said it would post a loss in its fiscal third quarter rather than the profit Wall Street had expected.
Several analysts cut back their profit outlooks or downgraded shares of Cabletron, a network systems maker, in the wake of the company's announcement released late Wednesday.
Cabletron shares topped the New York Stock Exchange's percentage-loss list as it fell 3-1/16 points or 26 percent to 10-1/16 in early trading. The stock, which had traded over 2 million shares by 1020 EST/1520 GMT has traded over the past year in a range between 23-1/4 and 6-5/8.
The Rochester, N.H. company said it would report a fiscal third-quarter loss because of price pressures and shifts in technology and also said it would take an unspecified charge in the quarter, which ended Nov. 30.
Analysts surveyed by First Call Corp. had been expecting the company to report $0.11 earnings per share for its third quarter. Instead, the company advised in a statement that it would post a $0.10 per share loss.
Merrill Lynch lowered its near-term rating on the network hardware and software maker to neutral from accumulate and kept its long-term rating unchanged at accumulate.
Meanwhile, in a research note, CS First Boston analyst Paul Weinstein cut his earnings per share estimates for fiscal 1999 ending in February to break-even from a profit of $0.36 and his fiscal 2000 estimate to $0.36 from $0.55.
Weinstein, who maintained a hold rating on Cabletron, wrote that the brokerage believes the stock "should be avoided" until there were clear signs the company had successfully addressed its problems.
Lehman Brothers lowered its estimates for fiscal 1999 to a loss of $0.01 per from a net of $0.39 per share.
"While CS remains a major networking franchise with a large customer base and promising new switching platforms, we believe it may take some time to regain sales momentum," Lehman said in a note issued Thursday.
Lehman maintained its neutral rating on the stock.
Cabletron, which has been battling price pressures and poor penetration in some markets and a maturing technology, now ranks fourth in the field behind Cisco Systems Inc. CSCO , 3Com Corp. COMS and Bay Networks Inc. BAY .
((Wall St Desk 212-859-1730)) REUTERS
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