February 10, 2000 3:50 PM PST

Cabletron to break business into four companies

Networking equipment firm Cabletron Systems plans to break its business into four separate operating companies targeting different markets in the industry.

Executives said the move is intended to focus each company on "accelerated growth" opportunities.

Cabletron plans four separate operating companies: Riverstone Networks, targeting the service provider and broadband equipment market; Enterasys Networks, focused on corporate networks; Global Network Technology Services, a services company; and the previously announced Aprisma Management Technologies, comprised of Cabletron's software business.

Initially, these separate operating companies will serve as subsidiaries of Cabletron, but plans are in the works to spin off each subsidiary as publicly traded entities, according to the company.

"This allows us to be a dominant player in the market, and more importantly, this allows us to (meet) our partners' and customers' needs and allows us to further focus on streamlining operations and unlocking shareholder value," said Cabletron chief executive Piyush Patel during a conference call with financial analysts.

Wall Street analysts agreed with Cabletron's evolution. After the announcement, the firm's shares rose nearly $2.50 to $37 in after-hours trading.

"This is positive news. You had a lot of dogma there that held the company back," said Gruntal & Co. analyst Michael Davies. "They're probably not going to be equal to a Foundry or Extreme (in market capitalization), but I certainly think their value will be greater separately, than held under one company."

Cabletron has altered its strategy in recent quarters, choosing to focus more and more on Internet service providers (ISP) and related communications companies. The company has historically been strong in corporate networking, but has slipped as others--such as Cisco Systems and Extreme Networks--have grabbed market share.

Cabletron has rebounded from fiscal woes in recent quarters.

A Cabletron spokesman said the company expects to have a smooth transition for its partners and customers. Each of the four new companies will license technology from each other, the spokesman said.

Cabletron, which has 4,500 employees worldwide, has not decided how many employees will work in the four companies. Over time, the separate firms will have separate management, separate research and development, and marketing and sales staffs, executives said.

Cabletron executives said Riverstone and Enterasys will share intellectual property because both will sell Cabletron's high-speed routing technology. In time, the technologies will change as Riverstone gears the equipment to service providers, while Enterasys will focus on the corporate market.

Riverstone will be based in Santa Clara, Calif., while the other three will remain in New Hampshire. The company plans to give more details on the restructuring after its current quarter ends at the end of February.

 

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