Cabletron to ditch digital network products

In an effort to further streamline operations and focus on high-growth markets, Cabletron Systems plans to divest itself of the Digital Equipment networking operations it acquired two years ago.

Cabletron will sell its Digital Networks Product Group and NetVantage operations within 90 days, Cabletron executives said. NetVantage was a maker of low-end stackable LAN (local area network) switches that Cabletron acquired in 1998.

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

Patel said Cabletron is courting both "financial" buyers and "strategic" buyers. Financial buyers are those that milk the business for cash and profit, and are not committed to investing in it. Strategic buyers are those that buy operations to make them part of their own product portfolio and retain strong brand recognition.

The company will also reduce its workforce by 600 to 800 employees in the first quarter of fiscal 2001 as it jettisons these operations and discontinues non-core product lines, said David Kirkpatrick, Cabletron's chief financial officer. Those product lines include low-density switches and remote-access products.

The company expects to report a loss next quarter of $US25 million to $45 million due to the restructuring, Kirkpatrick said.

Cabletron acquired the Digital Networks Product Group (DNPG) for $430 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 entrée into low-end stackable switches, a market dominated by 3Com. Cabletron never became a serious player at the low end.