Revenue Down But Income Up For Cabletron - InformationWeek

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Revenue Down But Income Up For Cabletron

Cabletron Systems Inc., the fourth-largest maker of computer networking equipment, yesterday reported first-quarter income before special charges that exceeded analyst expectations, as the company tried to reposition itself to compete more effectively against its larger rivals.

Cabletron, in Rochester, N.H., reported net income, not including one-time charges, of $7.3 million, or 4 cents per share, in the quarter ended May 31, compared with break-even results in the same quarter a year ago. Revenue declined to $349.5 million in this year's first quarter from $365.7 million in the same period last year. The mean analyst estimate for Cabletron's operating income was 2 cents per share.

Cabletron's gross profit margin, however, declined to 39% of sales in this year's first quarter, from 41% in the same period last year. Research and design expenditures and selling and administrative expenses, meanwhile, remained the same percentage of sales as in the year-ago quarter.

Including an inventory write-off from the discontinuation of several product lines and one-time restructuring charges, Cabletron lost $22.5 million, or 13 cents per share, in the quarter, compared with a loss of $154.6 million, or 95 cents per share, in last year's first quarter, which included $150 million in special charges.

Cabletron announced earlier this month that company co-founder Craig Benson had resigned as chairman, president, and CEO. Piyush Patel, formerly chief executive of Yago Systems, a closely held company Cabletron acquired in 1998, became Cabletron's new leader.

Cabletron is now focusing on its line of "smart products," including SmartSwitches, SmartSwitch routers, and SmartStacks. Its SmartSwitch router is designed to deliver more than 100 times the performance of a traditional router, with a transmission speed of 30 million packets/cells per second.

Cabletron stock yesterday rose 1-13/16 to close at 15-3/4. The earnings were released after the close of trading.

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