Check out a little growth,,,
Cabletron Systems Announces Second Quarter Results;
200% Growth for Flagship SmartSwitch Router Fuels
Third Consecutive Quarter of Positive Momentum
Business Wire - September 20, 1999 16:47
ROCHESTER, N.H.--(BUSINESS WIRE)--Sept. 20, 1999--Cabletron Systems, Inc.
(NYSE:CS) today reported financial results for the second quarter of fiscal 2000 ended August
31, 1999.
Net sales for the second quarter were $356.6 million as compared with $349.5 million in the
first quarter of fiscal 2000 and $370.6 million in the second quarter of fiscal 1999.
On a pro forma basis, net income was $12.5 million, or $0.07 per diluted share compared to
pro forma net income of $7.3 million, or $0.04 per diluted share in the prior quarter, for
sequential growth of 72% and 75%, respectively. Pro forma net income and earnings per
diluted share grew 19% and 17%, respectively, compared to pro forma net income of $10.5
million and $0.06 in the same quarter a year ago. The pro forma presentation, for the current
quarter, excludes the amortization of intangible assets related to purchase acquisitions of $7.5
million ($5.6 million, net of tax) and $10.0 million ($6.1 million, net of tax) of other income from
a gain on an equity investment.
For full details on the Company's results, see the financial table accompanying this release.
Pro Forma Condensed Statements of Operations (three months ended
August 31, 1999, May 31, 1999 and August 31, 1998)
(in thousands, except per share data) (unaudited)
Second First Second
Quarter Quarter Quarter
2000 2000 1999
Sales $356,639 $349,533 $370,591
Pro forma net income $12,499 $7,282 $10,531
Pro forma net income per
share - basic $0.07 $0.04 $0.06
Pro forma net income per
share - diluted $0.07 $0.04 $0.06
Weighted average number of common shares
outstanding - Basic 174,159 173,090 164,640
Weighted average number of common shares
outstanding - Diluted 186,381 181,671 170,462
Pro forma earnings before interest, taxes,
depreciation and amortization $33,101 $28,043 $26,342
Note: Pro forma results for the periods ended August 31, 1999,
May 31, 1999 and August 31, 1998, exclude the amortization of
intangible assets related to purchased acquisitions of $7.5 million,
$7.4 million and $6.0 million, ($5.6 million, $5.3 million and $4.1
million, net of taxes), respectively, $10.0 million ($6.1 million, net
of taxes) of a gain on an equity investment (reflected in August 31,
1999 other income), an inventory write-off related to product
discontinuations of $15.2 million (reflected in May 31, 1999 cost of
sales) and the associated $5.2 million tax benefit and a $23.7 million
restructuring charge (also reflected in May 31, 1999 special charges)
and the associated $9.2 million tax benefit.
"This is a fundamentally different company today than it was 6
months ago," said Piyush Patel, Cabletron chairman and CEO. "Fueled by
product successes such as the SmartSwitch Router, which grew over 200%
year-over-year, Cabletron is reasserting our position as the
industry's technology leader. We have a clear strategy and direction,
we are focused on execution and we now have clear visibility into our
business fundamentals."
Including all charges and other income, actual net income, for
the quarter ended August 31, 1999, was $13.0 million or $0.07 per
diluted share. This compares to an actual net loss of $22.5 million or
$0.13 per diluted for the quarter ended May 31, 1999 and actual net
income of $6.4 million or $0.04 per diluted share for the quarter
ended August 31, 1998.
Last week, at Networld+Interop in Atlanta, the Company announced
that it has formed an independent business unit to develop, market and
sell SPECTRUM, the industry's only multi-vendor enterprise management
platform. The Company decided to create the business unit to unlock
the full value of the SPECTRUM product, which grew more than 20%
sequentially.
"This is the right decision for Cabletron and for SPECTRUM,"
added Patel. "Customers have already responded with a great deal of
excitement about SPECTRUM becoming the de facto standard for network
management in their multi-vendor environment. Many of our traditional
hardware competitors plan to partner with us to bring native SPECTRUM
functionality to their platforms."
During the quarter, Cabletron made significant gains in the
service provider market, where it has focused on high-growth segments.
Cabletron has focused on the edge of the Internet, where enterprises
need to hand-off massive amounts of information securely and reliably
to their Internet service providers or leased line connections. It is
here, too, that service providers need to route converged voice, video
and data traffic to their customers.
The Company has targeted cable companies, competitive local
exchange carriers and Internet service providers providing Web hosting
and collocation services. Its xDSL modem, which it acquired from
FlowPoint, is one of the leading customer premises equipment (CPE)
devices in the DSL market. The SmartSwitch Router (SSR), which has
also helped the Company win major accounts in the enterprise market,
is rapidly becoming a standard platform for Internet service
providers. The SSR was certified by UUNET for use in its points of
presence (POPs) throughout its extensive network.
"Cabletron is well-positioned for its foray into the service
provider space," said Fred McClimans of Current Analysis. "The markets
on which it has decided to focus are at the early stages of rather
steep growth curves. If it executes its strategy well, and continues
to add customers like UUNET, GTE Internetworking and Mindspring, it
will have the opportunity to capture its share of a $30 billion market
in the next few years."
In the enterprise market, Cabletron continues to hold a strong
market position, especially with large enterprise customers such as
Goodyear Tire and Rubber, Glaxo Wellcome and others. The SmartSwitch
Router, which offers the quality of service (QoS) and
directory-enabled services that large organizations require to use the
Internet as a business tool, is again the market leader. According to
the Dell'Oro Group, Cabletron maintains its #1 share in Layer 3 ports
shipped during calendar Q2 1999. The Company also maintains a #2
position in modular Layer 2 switches, the core of the enterprise
networking market.
Cabletron's services business, on a standalone business would
rank in the top 10 in terms of service and technology providers. It is
unique in the breadth of professional services it provides, including:
design, implementation and availability consulting; network management
services; and security services. According to Dataquest, the services
market will grow on a global basis from $70 billion in 1997 to $148
billion in 2002, with a compound annual growth rate of 16.2%.
Cabletron anticipates its services business will grow at or above
industry annual growth rates led by its professional services
component.
"I am confident that as long as we continue to execute decisively
and with speed, we will be able to return the company to the level of
growth and profitability our shareholders, customers and employees
expect from Cabletron," said Patel.
About Cabletron Systems
Cabletron Systems, a premier provider of enterprise-class
networking solutions, delivers dependable network access and
communications to millions of people worldwide. With scaleable
products designed for Fortune 1000 enterprise networks, service
providers and small businesses, Cabletron provides simple, reliable
and cost-effective business solutions for the information age.
Cabletron's web site can be reached on the Internet at:
cabletron.com. |
