Cabletron tops estimates, sees strong growth for its units

The new-look Cabletron Systems posted a smaller-than-expected loss in its first quarter Wednesday, losing $3.7 million, or 2 cents a share, on sales of $275.1 million.

First Call Corp. consensus expected the network-equipment maker to lose 3 cents a share in the quarter.

Ahead of the earnings report, Cabletron (NYSE: CS) shares closed up 5/8 to 22 1/2.

For the first time, Cabletron, essentially a holding company these days, reported the individual results of its four business units and said at least two of the companies will go public later this year.

"In one quarter, Cabletron Systems has fully transformed itself--creating four of the most exciting companies in technology," said CEO Piyush Patel in a prepared release. "Each company exceeded our expectations for revenue growth while building scalable businesses capable of sustaining rapid growth."

The $275.1 million in sales marks a 28 percent decline from the year-ago quarter when it earned $28.1 million, or 15 cents a share, on sales of $381.8 million.

Including other income and all charges, Cabletron's actual net loss for the quarter was $37.9 million, or 21 cents a share.

Here's a look at the individual Cabletron units.

The Aprisma Management Technologies unit posted first-quarter sales of $15.1 million, up 13 percent from the fourth quarter. Officials said on a conference call that Aprisma, which provides network management software, will post year-over-year revenue growth of 40 percent in 2001. The company expects to break even in the first half of 2001.

Enterasys Networks posted sales of $177.1 million, up 5 percent from last quarter. Officials said the sales growth was at the top end of their range. Going forward, Enterasys sees year-over-year growth in the 20 percent range. The company, which sells enterprise routers and switches, will break even in the second quarter.

GlobalNetwork Technology Services and Riverstone Networks checked in with sales of $10.4 million and $15.8 million, up 29 percent and 24 percent, respectively, from the fourth quarter.

GlobalNetwork, a network consulting company, said it's confident it can post revenue growth in "excess of 80 percent" year-over-year. Profitability is projected in the first quarter of 2002.

Riverstone, the company's best IPO hope, is focused on the hot metropolitan optical networking market. The company landed more than 40 customers, and projects sales growth of 21 percent per quarter and more than 100 percent annually.

Riverstone reported a 2000 loss of $11.5 million to $12.5 million and will continue to lose money. Losses will narrow in 2001 and the company will break even in mid-2002, officials said.

"Each of the four companies is targeting a large and growing market, ripe with opportunity," Patel said. "Markets permitting, we expect to have two of the companies perform public offerings this year. We are announcing today that we expect Riverstone to be the first of the companies to pursue an IPO. We expect to begin the process shortly and hope to complete the offering in the fourth quarter."

Last quarter, Cabletron hurdled analysts' estimates, earning $28.1 million, or 15 cents a share, on sales of $381.8 million.

Its shares moved up to a 52-week high of 52 3/4 in March after falling to a low of 11 1/8 last June.

Nine of the 16 analysts tracking the stock still rate it a "hold."

Analysts are looking for a profit of 5 cents a share in the fiscal year.