Cabletron SERIOUSLY messed up...spells opportunity for MRVC.
(from the story)
"Analyst Lindsay said Cabletron was trying to manage the
tricky feat of migrating its existing customers of high-end,
shared-media hubs over to high-end switches.
"They have used their direct-sales force to do this," he
said. "They are very oriented toward direct sales, not indirect
distribution. In my opinion, this has been a challenging
transition for them, because it's not clear that the same
people who buy hubs are the same people who would buy their
high-end switches."
(full text)
Cabletron (NYSE:CS) may need more cuts -
Reuters, Tuesday, December 16, 1997 at 19:27
The job cuts include plant closings in Nashua, New
Hampshire and Andover, Massachusetts, the company said.
A Cabletron spokesman said the New Hampshire layoffs would
total 240.
"We don't think the restructuring will be deep enough,"
said Gina Sockolow, an analyst at Schroder & Co.
"There's $80 million of excess inventory, and $80 million
of excess receivables that have to be written down, and $30
million is not enough to cover it," she said
"We think that a lot of good things are happening, but we
are afraid there will have to be another restructuring charge."
ROCHESTER, N.H., Dec 16 (Reuters) - Cabletron Systems'
$30-million restructuring charge is a step in the right
direction, but the company may require further cuts to get a
grip on its problems, analysts said Tuesday.
They added that the move could make Cabletron an attractive
takeover target, though Cabletron denied it was for sale.
New Hampshire-based Cabletron, a computer-networking
company, said earlier Tuesday it will take a fourth-quarter
charge against earnings of $25-30 million, and that it would
axe 600 jobs worldwide, or one-tenth of its work force.
Cabletron said its moves would yield $50-$60 million of
annualized savings, starting this quarter.
Among Cabletron's problems are delays in new product
rollouts and a need to widen distribution channels, Sockolow
said.
But she said that Don Reed, the company's new president and
chief executive who joined in August, was moving things in the
right direction.
"They need to consolidate control of senior management
under Don Reed," Sockolow said.
Former Chief Executive Bob Levine, who co-founded the
company in 1983, left earlier this month.
Cabletron last month warned of a restructuring charge in
the fourth quarter but did not give details.
"The amount of cost savings looks bigger than what I
expected, so that's good," said Noel Lindsay, analyst at DMG
Technology Group.
"But the mere fact that they have to lay people off is of
course bad, because it tells you that the problems are not
likely to be short-term and anomalous. They're probably
enduring and that's why they have to make these changes."
Lindsay said the move would make Cabletron a more
attractive takeover target.
"By lowering their costs significantly, this could
considerably improve their profitability, and make them a less
dilutive acquisition," he said.
However, Cabletron spokesman Darren Orzechowski said the
company was not for sale.
"We have no intention of being sold," Orzechowski said.
"The business is still a very profitable and very healthy
company. If you look at our balance sheet, if you look at our
income statement, the company made $25 million this past
quarter and is doing extremely well," he said.
Analyst Lindsay said Cabletron was trying to manage the
tricky feat of migrating its existing customers of high-end,
shared-media hubs over to high-end switches.
"They have used their direct-sales force to do this," he
said. "They are very oriented toward direct sales, not indirect
distribution. In my opinion, this has been a challenging
transition for them, because it's not clear that the same
people who buy hubs are the same people who would buy their
high-end switches."
Cabletron stock on Tuesday gained $0.0625 to close at
$14.00 on volume of 1.82 million shares.
Gary Ghioto in Concord, New Hampshire, (603) 223-2434)) |
