Cabletron ditches lines to lift profits

Continued low margins coupled with intense competition are the likely catalysts for Cabletron Systems' decision to divest itself of the (DEC) Digital Equipment Corporation networking operations it acquired two years ago.

"3Com and Lucent Technologies have gone down this path previously which hasn't done their share price any harm," Geoff Johnson, an analyst at Gartner Group, told Computerworld.

According to a Cabletron executives, its DEC Networks Product Group and NetVantage operations will be offloaded by the end of June.

"[In February], we hired an investment banker to do a sale of those groups, and we've made very good progress," Piyush Patel, Cabletron's chief executive officer, said. "I feel comfortable that we'll be able to announce the transactions in the next 90 days, or probably sooner."

However, as no company has been mentioned in the pending deal, Cabletron may have few options to pursue, according to Johnson.

Cabletron acquired the DEC Networks Product Group (DNPG) for $US430 million in February 1998 for its distribution channels, service provider market presence and international product exposure.

Cabletron's Enterasys enterprise subsidiary is actively marketing the Digital RoamAbout wireless equipment, and has benefited from DNPG's routing and VPN (virtual private network) technology, Patel said.

DNPG's GigaSwitch and DEChub products, which at one time were key offerings for Digital, will be retired, Patel said.

Cabletron acquired NetVantage in September 1998 as an entree into low-end stackable switches, a market dominated by 3Com. Cabletron did not become a serious player at the low end.

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