Cabletron comfortable with estimates

3 min read

Cabletron Systems on Wednesday said it sees no reason for analysts to change their fiscal first-quarter expectations.

"I am very pleased with our fourth-quarter momentum and continue to be optimistic about our future prospects," Cabletron CEO Piyush Patel said during a conference with analysts. The company reported its fourth-quarter results Wednesday.

Executives of the holding company for network equipment and services vendors said they remain comfortable with consensus earnings estimates for their fiscal first-quarter ending in May. Analysts surveyed by earnings tracking firm First Call currently predict a first-quarter profit of 8 cents per share for Cabletron (NYSE: CS).

First-quarter revenue for Cabletron will range from $305 million to $310 million, said David Kirkpatrick, chief financial officer. First Call consensus currently predicts a revenue of $308.8 million for Cabletron's May quarter. Cabletron may beat its first-quarter forecast, depending on how the overall economy fares, Kirkpatrick said.

Cabletron's confidence in analysts' current estimates makes it one of the few network companies that is not lowering near-term expectations.

Industry giants and Cabletron rivals Cisco Systems (Nasdaq: CSCO) and Nortel Networks (NYSE: NT), which issued a second warning Tuesday, have both slashed sales and earnings estimates for the current quarter. Networking stocks fell Wednesday in response to Nortel profit warning.

Shares of Cabletron traded at $11.25 in after-hours activity on the Island ECN, immediately following the news. Cabletron fell $1.34 to $10.99 in Wednesday's regular trading ahead of the report.

The company reported fiscal fourth-quarter net income of $10.7 million, or 6 cents per share, a penny better than First Call's forecast. Fourth-quarter revenue increased 10 percent sequentially to $291 million. First Call predicted fourth-quarter revenue of $281.8 million.

The better-than-expected fourth-quarter results come just a month after the initial public offering of Cabletron's Riverstone Networks (Nasdaq: RSTN) spin-off.

Last week, Riverstone reported its first quarterly results as a separate company, topping analysts' estimates by a couple cents a share when it posted a loss of $5.5 million, or 6 cents a share, on sales of $12.8 million.

Most of Cabletron's revenue was generated by its Enterasys Networks subsidiary, which saw fourth-quarter revenue of $221.1 million. Enterasys sells network equipment and services for corporations and large organizations.

Aprisma Management Technologies, Cabletron's unit specializing in network software, generated revenue of $21.9 million.

Also Wednesday, Cabletron said the Internal Revenue Service has ruled the company can distribute its Riverstone Networks (Nasdaq: RSTN) holdings to Cabletron shareholders as a tax-free spin-off. Cabletron currently owns about 86 percent of Riverstone, which recently went public.

Enterasys and Aprisma will be spun off to Cabletron shareholders in the future, Patel said. Cabletron would consider an initial public offering for those units instead, if the IPO market rebounds before plans for a shareholder spin-off are firmed up.

"We are seeing the economic conditions slow down as everyone else is...But we at Enterasys and the other Cabletron companies are very well positioned to gain market share," Patel said. "I think our fourth quarter was a huge, huge accomplishment, given the economic conditions."