Cabletron To Launch New
Services Group
By Kimberly Caisse
Rochester, N.H.
..............
Cabletron Systems Inc. is trying to regain revenue momentum in the competitive
networking space by broadening its horizons.
The company is launching in April a professional service organization, developing
more networking software and entering the service provider market, said
Cabletron executives.
Cabletron needs a financial boost. In its most recent quarter ended November,
the company lost $85 million, including special charges, compared with a profit
of $19.9 million in the year-ago quarter. Sales barely grew to $331.8 million,
compared with $329.9 million in the same period a year ago.
The company, based here, is reorganizing to reflect its new direction, said Mike
Skubisz, Cabletron's chief technology officer. The company has created
business units to handle the software initiative and the service provider business,
he said.
The professional service organization, which is not a separate business unit, will
offer services such as security assessment and project planning directly to
Cabletron's 1,500 named accounts, Skubisz said. Other customers can buy the
new service packages indirectly through VARs.
Resellers also can provide their own services in addition to Cabletron's, Skubisz
said.
Cabletron is looking to grow its service sales to $1 billion annually from today's
$200 million in yearly revenue, which comes mostly from its Spectrum
Professional Service Group, he said.
"I like reselling vendor services," said Gary Hiniker, vice president of marketing at
Concord Information Systems Inc., a Cabletron VAR in Lexington, Mass. "They
have a lot of resources and deep pockets to fix the problem. You can usually get
30 percent margins selling those services."
Cabletron's initiative is in line with customers' interest in managing their
networks, said Bill Annino, senior sales representative at SyNet Inc., a Cabletron
VAR based in Warwick, R.I.
"In today's environment, customers are swapping out old hardware because its
not SNMP [simple network management protocol] and RMON [remote
monitoring] compliant," he said.
Cabletron also expects revenue growth from new software products, which will
supplement Cabletron's existing Spectrum network management family, Skubisz
said. This Cabletron business unit will develop "value-added software" such as
directory services products, accounting and billing tools, asset management,
virtual private network (VPN) service provisioning and policy administration tools.
"I think it's a very good plan," said Chuck Benton, special projects team leader
at Nevada Power Co., Las Vegas. "As networks mature, those [software]
features are definitely going to be required."
Cabletron, an enterprise-focused company, is banking that entering the services
and software will get it into the service provider market. "We want to start to
leverage the service provider marketplace," Skubisz said. "We want to provide
products that meet [at the] edge" of both enterprises and service providers, he
said.
Cabletron is heading in a completely different direction with this strategy,
analysts said.
"I would say it's quite a change for them," said John Armstrong, principal analyst
at Dataquest, a San Jose, Calif.-based market-research firm. "It would not be
unfair to say if Cabletron maintains its current direction,competing directly with
Lucent [Technologies Inc.], Cisco [Systems Inc.], Nortel [Networks Corp.] and
3Com [Corp.],it is not a winning combination. Whatever they're doing, it has to
be preferred to inaction," he said.
"Up to this point, they've stayed hardware-centric and never wavered from that,"
said Greg Cline, service director of enterprise market and channel strategies at
Summit Strategies, Boston. "The circumstances have forced [Cabletron] to do
this."
"Spectrum itself is profitable, but whether it will act as a pull-through for other
Cabletron gear remains to be seen," said Michael Speyer, analyst at The
Yankee Group, Boston. And gaining ground in both the service provider and
service market is going to be daunting given the amount of competition in each
area, he said.
Separately, Cabletron plans to introduce products such as a voice-over-IP
gateway and IPsec-compliant VPN routers in the coming months, Skubisz said.
Cabletron is expecting to release a family of voice-over-IP gateways prior to
Networld Interop in May. One product will be an integrated gateway router;
another will be a stand-alone gateway.
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