CPQ mentioned toward the bottom of this CS release.... By the way, where is Elwood???
John
4Q Tops Views But Cabletron Unveils
Outsourcing, 1Q Warning
Dow Jones Newswires
This story was originally published Monday.
PALO ALTO, Calif. (Dow Jones)--Networking-equipment maker
Cabletron Systems Inc. (CS) said it agreed to outsource most of its
manufacturing to Celestica Inc. (CLS) in a deal worth $300 million a
year in revenue to Celestica.
The deal should save Rochester, N.H., based Cabletron $50 million
in annual production costs and enable the company to deliver
products to the market faster, Cabletron officials said. It also will
bring Cabletron $60 million to $80 million in cash through the sale of
capital equipment and raw material to Celestica, the officials said
on a conference call.
Cabletron expects to realize another $30 million in annual cost
savings from a growth and restructing plan, entitled Ignition, which it
announced along with the Celestica deal. As part of the outsourcing
and restructuring plan, Cabletron will cut its workforce of 5,951 by at
least 16% over the next three quarters.
Cabletron was among the last of the major networking companies to
hold onto its manufacturing operations. Industry leader Cisco
Systems Inc. (CSCO), for instance, had long ago turned to contract,
or outside, manufacturing as a way to trim costs.
The struggling switch maker announced its Ignition initiative as it
posted fourth-quarter earnings ahead of Wall Street's expectations
for a money-losing quarter. Operating earnings were 1 cent a share
and revenue grew 11% to $345 million from $311 million a year ago.
Including a $17.6 million charge, the company posted a loss of 5
cents a share for its fourth quarter, compared with a loss of $1.67 a
year ago, which also included a charge.
However, Cabletron warned that its first quarter would be tougher.
The company will see about $40 million in sales to Compaq
Computer Corp. (CPQ) slip from the first to the second quarters
because Compaq's quarter ends a month later and the company
won't need the products until then, Cabletron said.
No similar sales delays are expected in future quarters.
Cabletron also expects a first-quarter charge of between $50 million
and $70 million as a result of the outsourcing plan. |
