Rebounding Cabletron beats Street

Despite beating estimates, the networking equipment provider dips more than 9 percent in early morning trading.

2 min read
Despite beating estimates, networking equipment provider Cabletron Systems dipped more than 9 percent in early morning trading.

With essentially flat revenues, the company remains on the rebound from fiscal woes. Its announcement of a 9-cents-per-share profit is a far cry from the same period the previous year, when the company reported a 37-cents-per-share profit. The company's stock is trading far below its 52-week high of 35 13/16.

Nevertheless, Cabletron Systems beat analysts' estimates by a cent for its just-completed fiscal second quarter, as the company continues to shift its base to more advanced kinds of networking technology.

Still rebounding from the first tumultuous fiscal period in its history, the Rochester, New Hampshire-based provider of networking equipment announced net income of $14.6 million or 9 cents a share, compared with net income of $57.6 million or 36 cents a share posted for the same period a year ago.

The 9-cent earnings performance for the quarter more than doubled that of the previous period sequentially.

Revenues for the second quarter of fiscal 1999 came in at $370.6 million, down from $371.3 reported for the same period a year ago.

A consensus of analysts' estimates targeted Cabletron's earnings at 8 cents per share, according to First Call.

Previously a giant of shared networking technology, Cabletron announced that over 50 percent of its sales for the quarter derived from the company's dedicated switching equipment, with less than 15 percent coming out of the shared media. According to the company, shared networking technology accounted for 70 percent of its revenue just two years ago.

Technology acquired from a start-up called Yago Systems is expected to drive Cabletron's sales going forward. Sales of Yago-based equipment tripled quarter-over-quarter, according to the company, though they still represent less than 5 percent of Cabletron's sales overall.

"With the continued transition from older shared-access technologies to next-generation switching, we clearly still have work ahead of us," Craig Benson, Cabletron's chairman and chief executive officer, said in a statement.

The company had missed expectations for its previous quarter.

One area of concern remains--the equipment Cabletron acquired from the Digital Equipment unit of Compaq Computer. Benson said sales of that gear were "not quite as good as hoped."

Cabletron did not have the additional revenue from Digital last year, when it posted better revenue figures for the same period.

A series of acquisitions will be accounted for in Cabletron's third fiscal 1999 quarter, totaling 46 cents. Included in the one-time earnings hit are an 11-cent charge for the acquisition of remote access technology from Ariel, another 11-cent charge related to the acquisition of digital subscriber line specialist FlowPoint, and a 24-cent charge related to the purchase of NetVantage.

Cabletron announced that it finalized the FlowPoint acquisition at the close of the market. The company said it made the first of four payments for the 65 percent of FlowPoint that it does not currently own.