Cabletron aims for growth through services investments

Even as it decides to sell off its own systems integration and consultancy service business, Cabletron Systems Inc. plans to invest in systems integration and consultancy partners that will help the company grow its networking equipment and management businesses.

"We will invest to expand the Cabletron ecosystem by investing in partners such as system integrators, and other companies that help in selling Enterasys and Riverstone products," said Piyush Patel, chairman and chief executive officer of Rochester, New Hampshire-based Cabletron, during a telephone press briefing Tuesday for journalists in India.

Cabletron transformed its business last year through the formation of four independent operating companies. In February, one of the four subsidiaries, Santa Clara, California-based Riverstone Networks Inc., which makes equipment for metropolitan area networks, had its initial public offering. Another subsidiary, Enterasys Networks in Rochester, offers networking gear for corporate networks, while Durham, New Hampshire-based Aprisma Management Technologies offers network management software for both enterprise and service provider customers.

Cabletron announced last month that it expects to announce by July 16 "either a sale or other disposition" of its fourth subsidiary, Newington, New Hampshire-based GlobalNetwork Technology Services (GNTS). "The system integration and consulting business is not doing as well financially as we had originally planned," said Patel. In the quarter ended June 2, GNTS posted a pro forma net loss of US$7.1 million on revenue of $11.9 million. Cabletron's approach has also shifted from owning the systems integration and services business to partnering with other companies for these services.

"We found that having a horizontal approach, where we partner (with) a lot more system integration companies in each of the countries, provides a localized and more relationship-based approach than sending GNTS people all over the world, and trying to get them to build the relationships," added Patel. Cabletron expects that partnerships with local systems integrators in many countries will help increase business for both Riverstone and Enterasys.

Besides investing in systems integration and services companies, Cabletron also plans to invest in companies developing software, wireless, and next-generation optical technologies. Cabletron also plans to buy companies, which it will nurture and grow within the "Cabletron ecosystem," and spin them off once they become larger, according to Patel.

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