Cabletron snags $200 million to aid company split

The investment by Silver Lake Partners will help the network equipment maker, but just as important is Silver Lake's expertise in helping start-ups get off the ground, Cabletron says.

Investment firm Silver Lake Partners plans to sink up to $200 million into network equipment maker Cabletron Systems and its four newly created subsidiaries.

Silver Lake Partners will own up to a 3 percent stake in each new firm and help Cabletron spin off the companies with a public offering, a Cabletron spokesman said.

Cabletron two weeks ago announced it is splitting the company into four distinct entities: Riverstone Networks, focused on the service provider market; Enterasys Networks, targeting corporate networks; Global Network Technology Services, a services company; and Aprisma Management Technologies, made up of Cabletron's network management software business.

The investment will help Cabletron, but just as important is Silver Lake's expertise in helping start-ups get off the ground, according to Cabletron. The company already has between $500 million and $600 million in cash, as well as $1.5 billion in short-term investments.

"We're getting Wall Street financing with Silicon Valley savvy," said Tom McCallum, Cabletron's director of investment relations. "We're pretty well-heeled at this point, and it helps validate our strategy of spinning these companies off. There was concern that we didn't have the management bandwidth to do four IPOs (initial public offerings) in one year. They've been through this and done it before."

Silver Lake Partners, which has $2.3 billion in investment funds, is owned by several partners, including representatives of investment firms Integral Capital Partners and Kleiner, Perkins, Caufield, and Byers.

"They have a lot of connections, not only in the financial community, but also the heads of technology communities," said Cabletron spokesman Mike Quinn. "They have a lot of built-in knowledge that we can tap into."

Separately, the company today unveiled a strategy to provide service providers with networking equipment that combines voice and data in a single Internet-based network. Cabletron expects to ship products later this year. The move by Cabletron is similar to strategies previously announced by rivals Cisco Systems, Nortel Networks, Lucent Technologies and others.