Cabletron Systems has reached a definitive agreement for the sale of its FlowPoint DSL subsidiary to Efficient Networks of Dallas.
Cabletron also says it has formed an OEM alliance with Efficient for xDSL products. Cabletron acquired FlowPoint in September 1998.
Under the terms of the sale, Efficient will pay 13.5 million shares for the FlowPoint subsidiary of Cabletron Systems. Based on Efficient's closing price of $US63.75 on November 19, 1999, the transaction has an aggregate value of approximately $860.6 million. This agreement makes Cabletron the largest shareholder in Efficient.
Pending regulatory approval, the sale is expected to close during Cabletron's fiscal fourth quarter.
The deal is curious in that Cabletron has stated repeatedly in the past that FlowPoint was critical to the company's push into the service provider market, a strategy designed to broaden its revenue base.
Selling FlowPoint indicates that Cabletron is more interested in the "quick hit" asset sale approach toincreasing shareholder value vs. new revenue streams, and that company management is dressing Cabletron up for sale, observers note.
"Over the past six months, we have been extremely focused on identifying and unlocking the value within Cabletron," said Piyush Patel, Cabletron's president and CEO, in a statement. "Cabletron intends to Continue focusing on providing high-end solutions, including Web caching, server load balancing, and multi-dwelling unit solutions, to service providers, including ASPs, ISPs, CLECs, ILECs, MSOs and RBOCs."
Through the OEM alliance, Cabletron gains access to xDSL products for the customer premise, including xDSL routers and modems.