Earnings, upgrades not enough for Cabletron shares

Cabletron Systems Inc. (NYSE: CS) shares fell 1 5/8, or 9 percent, to 17 1/2 Tuesday even though it beat analysts' estimates in its second quarter and received favorable comments from a pair of brokerage firms.

In the quarter, Cabletron pulled in $12.5 million, or 7 cents a share, on sales of $356.6 million.

First Call consensus expected the Rochester, N.H. company to earn 6 cents a share in the quarter.

Ferris Baker started the stock with a "strong buy" recommendation Tuesday while BancBoston Robertson Stephens reiterated its "buy" rating and raised its 2000 and 2001 earnings-per-share estimates to 29 cents and 51 cents a share, respectively.

In the year-ago quarter, Cabletron earned $10.5 million, or 6 cents a share, on slightly higher sales of $270.6 million.

During its conference call, Cabletron officials warned that its revenue growth would be flat for the next few quarters.

"This is a fundamentally different company today than it was six months ago," said CEO Piyush Patel, in a prepared release. "Fueled by product successes such as the SmartSwitch Router, which grew over 200 percent year-over-year, Cabletron is reasserting our position as the industry's technology leader."

Last quarter, Cabletron topped Street estimates, earning $7.3 million, or 4 cents a share, on sales of $349.5 million.

The stock surged to a 52-week high of 19 15/16 earlier this month as speculators continue to view it as a potential takeover target. Its shares hit a low of 7 3/16 in April.

Fourteen of the 20 analysts following the stock maintain either a "hold" or "sell" recommendation.

First Call consensus expects Cabletron to earn 33 cents a share in the fiscal year.