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Cabletron drops 15% on warning

The company warns that its revenue will fall because of a shortfall in sales and charges.

Cabletron Systems (CS) said yesterday that its quarterly revenue will drop below year-ago levels after a shortfall in sales for some parts of the business.

The company's stock fell nearly 15 percent yesterday, to 13-1/4, down from Friday's close of 15-1/2. It inched up another 15/16 today, to close at 14-3/16.

Revenues for Cabletron's fiscal 1998 fourth quarter are expected to range between $305 million and $320 million, down from $380.6 million for the same quarter a year ago.

The company expects to report charges of $420 million, or after-tax charges of $1.61 per share. It will report a $335 million charge due to in-process R&D; a $55 million charge related to the close of the Digital Network Products Business; and a $30 million charge for realignment.

The company expects to report a per-share range of between break-even and a "small loss" before charges. A year ago, the Internetworking giant reported profits of 34 cents a share. Analysts had expected profits of 16 cents a share for the current quarter, according to First Call.

Cabletron expects to release final results for the fourth fiscal quarter March 30.

Don Reed, Cabletron president and CEO, said in a statement that the company experienced continued softness in its business with the federal government. In addition, it experienced an order shortfall in certain domestic segments at the end of the quarter, a time when it usually realizes a large percentage of its orders.

"Despite the strength of the activities of the quarter, including the closing of our Digital acquisition and the announcement of the definitive agreement to acquire Yago Systems," said Reed, "there were some pitfalls in our domestic sales which we are aggressively addressing."