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Strategies & Market Trends : The Thread Formerly Known as No Rest For The Wicked -- Ignore unavailable to you. Want to Upgrade?

To: stan s. who wrote (51929)	6/25/1999 8:40:00 PM
From: stan s.	Read Replies (1) \| Respond to of 90042

Compaq, Cabletron set to unveil new network pact Friday June 25, 7:55 pm Eastern Time By Eric Auchard NEW YORK, June 25 (Reuters) - Compaq Computer Corp. (NYSE:CPQ - news) and Cabletron Systems Inc. (NYSE:CS - news) are set to announce on Monday renegotiated terms for a major network equipment deal that Compaq inherited as part of its $8.4 billion acquisition of Digital Equipment Corp. Details of the restructured deal will be unveiled Monday, the two companies said in an advisory issued late Friday. Cabletron and Compaq said they planned to hold a conference call to discuss their deal Monday at 10:00 a.m. EDT (1400 GMT). During a conference call with analysts and reporters last Monday, Cabletron executives signaled a renegotiated pact would be announced imminently. The call followed the Rochester, N.H.-based cable company's earnings report for the quarter ended in May. Cabletron Chief Executive Piyush Patel said in an interview that followed the financial report that the renegotiated deal would provide a more predictable payment stream for both companies, easing the erratic impact on quarterly results. ''The total amount doesn't necessarily grow, but has more predictability,'' he said of the plan to smooth the quarterly effect of the resale deal on the companies' results. ''By the end of July, we will be shipping Compaq-branded products,'' Patel had said during the conference call, which preceded the interview with Reuters. The contract stems from a Nov. 1997 pact in which Digital Equipment agreed to sell its computer network products division to Cabletron for $430 million in cash and stock. The deal included $290 million in product credits tied to a strategic partnership in which Digital would resell and service certain Cabletron products over three years. Compaq inherited the contract when it acquired Digital Equipment 12 months ago. Analysts said the new deal may possibly have a material impact on quarter-to-quarter results of Compaq by easing the burden of irregular payments it must make under the existing contract -- smoothing the terms into steady periodic payments. SG Cowen Chris Stix said after the conference call last Monday that the deal would set quarterly minimums for Cabletron on revenue from Compaq. The dollar amounts exchanged under the equipment deal would remain the same, however, analysts said. A spokeswoman for Cabletron declined to comment further ahead of the announcement Monday. A Compaq spokesman could not be reached immediately to comment. Frank Dzubeck, an industry consultant with Communications Network Architects Inc. in Washington, said the new deal would likely focus on renegotiation of the original pact. There was little chance the new deal would include a possible sale of network assets by Compaq to Cabletron, or vice versa, he said. The analyst said the net effect will likely be to ease the onerous terms of the ''sweetheart deal'' Digital struck to off-load its flagging network products business on Cabletron -- a move that made Compaq's quarterly results less predictable. Scheduled to participate in Monday's call are Patel, Cabletron Chef Financial Officer David Kirkpatrick and B.J. Johnson, the vice president and general manager of Compaq's Network and Access Communications unit.