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Is Cabletron Back?

Cabletron Systems Inc. (NYSE: CS) projected a beam of optimism to the cloudy telecommunication and networking industry outlook with glowing first quarter earnings and revenues.

Cabletron? Yes, Cabletron.

The N.H.-based company, a one-time high-flying networking company that crashed and burned in the mid-90s and was then reconfigured as a spinout shop, is finally regaining some momentum. In earnings announced Wednesday night, the company matched analysts’ estimates with pro forma earnings of $14 million, or 8 cents a share, on $311 million revenues for the quarter ending June 2. Earnings grew sequentially from $11 million, or 6 cents a share, from the previous quarter but were flat with last year’s first quarter. Revenues grew 9 percent sequentially from $286 million the previous quarter and 13 percent from $275 million a year ago. In an analyst conference call after Wednesday’s market close, company officials said they expect revenues to climb to the $320 million to $330 million range in the second quarter.

Despite the continued slowdown in corporate and carrier spending, the telecommunications and networking holding company is making a strong showing on several fronts. It is basking in recent good news from Riverstone Networks (Nasdaq: RSTN), in which Cabletron holds an 85 percent stake. Riverstone on Wednesday announced a large contract with Korea Telecom to provide products for last-mile Ethernet access, its latest deal in a string of recent major customer wins.

Last week, Riverstone reported better than expected revenues and earnings. Cabletron plans to distribute its Riverstone stock to Cabletron shareholders by early August.

Meanwhile, Enterasys, Cabletron’s subsidiary that serves the corporate enterprise market, is consistently gaining market share, according to UBS Warburg analyst Michael Weintraub in a Wednesday report. The unit’s revenues grew 32 percent from a year ago and already account for three quarters of Cabletron’s revenues.

Former customers who became disgruntled with the company years ago are gradually returning to the newly restructured unit because of its competitive advantages. Enterasys officials project sequential growth of about 3 percent to around $240 million for the second quarter.

CEO Piyush Patel expects to spin off Enterasys as an independent public company in August. Weintraub and other analysts believe the spinoff would further help secure its success in the enterprise market by insulating it from lingering negative associations with Cabletron. And, of course, Cabletron shareholders would be the biggest beneficiaries of a successful spinoff.

Cabletron also expects to spin off Aprisma, a provider of management software for corporations and service providers, by year-end. Regarding its fourth subsidiary, GlobalNetwork Technology Services, Cabletron plans to announce a sale or disposition by July 16.

Weintraub predicts Cabletron will increase revenues 35 percent in the 2002 fiscal year, which runs through March 31, 2002. He rates Cabletron a “buy” and has a $22-per-share 12-month price target.

In early morning trading on Thursday, shares of Cabletron traded up 1.92 (9.91%) at 21.30. Cabletron stock is now up 110 percent from a low of 10 hit in April of this year.

- Tom Davey, special to Light Reading
LeCastor71 12/4/2012 | 8:08:31 PM
re: Is Cabletron Back? CS is a stock symbol and holding group for numerous spin-offs. I wouldn't even seek to tarnish it with the name "Cabletron", granted they do still use the domain name. Piyush at the healm is doing a great job and my commendations to Romulus at Riverstone as well. I don't know much about the top line at Enterasys but I'm hearing very good things about them.

The CS shell has proven that, through divestiture, smaller is better...particularly in Enterprise (Enterasys) and for focus on Metro routing markets (RSTN).

Cabletron as a "company" is dead and in this case, I'm pleased to say: Let sleeping does die.

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