Cabletron reports Q3 loss

Cabletron Systems yesterday reported a loss of $US21.1 million or 12 cents per share on sales of $US329.9 million for fiscal year 1999's third quarter, ended November 30, 1998.

If third-quarter special charges of $US74.7 million are taken into account, the company's net loss is $US85 million or 50 cents per share, Cabletron said in a statement yesterday. The special charges come from in-process research and development costs related to acquisitions of NetVantage, Flowpoint and a division of Ariel.

In the year ago quarter, Cabletron had $US331.8 million in net sales compared to the $US329.9 million reported in the third quarter of 1999. Net income a year ago was $US19.9 million or 12 cents per share on a diluted basis, compared to the loss reported this fiscal year.

Cabletron, which makes enterprise networking equipment, needs to work on its "operating basis" and will prioritise growth areas this quarter, said Chairman and Chief Executive Officer Craig Benson in a written statement.

"It is clear that we still have some work to do to bring operating procedures in line," elaborated Cabletron spokesman Mike Quinn. "At the same time, we are excited by growth in key sectors, including our Smart Switch Router product line." Cabletron expects to see continued growth in this market segment, he said.

There were four primary factors that lead to Cabletron's quarterly losses, according to Quinn.

Cabletron, which traditionally has been able to bounce back after a slow second fiscal quarter, between the months of June and August, was not able to rebound this time, Quinn said.

There has also been a significant transition from shared media towards switched media in the networking industry, Quinn stated. Cabletron's shared media offerings accounted for only 10 per cent of its quarterly revenue, while switched products generated 58 per cent of company sales, he said.

The loss of certain large telecom customers also played a part in Cabletron's slow quarter, Quinn said.

Telcoms, such as Nortel and Lucent Technologies are moving into the networking space themselves, especially for internal buying and selling, said Quinn.

Finally, Cabletron realised less than anticipated sales from its business relationship with Compaq Computer. Cabletron bought Digital Equipment's Networking Product Business prior to Compaq acquiring Digital which brought Compaq's business to Cabletron.

For the future, Cabletron sees a solid working relationship with Compaq, resulting in increasing sales for the company, Quinn said.

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