Users welcome possible Cabletron sale

Cabletron Systems users and industry observers last week welcomed press reports that the company is seeking a buyer.

The New York Post reported last week that Cabletron has enlisted the investment bank Merrill Lynch to find a buyer for the ailing network hardware maker. Cabletron executives reportedly are seeking at least $US2.5 billion for the company, substantially above its current market value. Cabletron officials declined to comment on the reports.

If the company is put on the block, observers expect it to draw the intense interest of foreign telecommunications equipment giants, a prospect that appealed to some Cabletron customers.

"I hope they do get bought out," said Edward Bianco, CIO (chief information officer) of Lowell General Hospital, in Lowell, Massachusetts. "I don't think they can stand on their own. If they keep losing money, how can they invest in new technology?"

As data and voice networks move toward convergence, Cabletron has struggled with a product set focused on enterprise LANs (local area networks), posting losses in three of the past four quarters. Competitors, including Cisco, Nortel Networks, and Lucent, are quickly equipping themselves to offer product lines that span the combined networks.

A recent effort to bolster its channel presence may have stalled, according to one analyst. Several channel executives have resigned in recent months, he said.

"If the channel people who have left aren't replaced quickly, that would indicate a focus on other areas, perhaps positioning themselves for acquisition by a company with an existing channel," said Glenn Gabriel Ben-Yosef, an analyst at Clear Thinking Research, in Boston.

Analysts said foreign telecommunications vendors will need data networking products to complete an end-to-end offering. With a large customer base and its SmartSwitch Router Layer 3 switch, Cabletron could be a prize for a company without a large North American presence. Ericsson, Alcatel, or Nokia in Europe, or NEC or Hitachi in Japan, could benefit from Cabletron's assets, they said.

"There really is a convergence going on between data communications and telecom, and in the end we're going to end up with one network," said Michael Howard, president of Infonetics Research, in San Jose, California. "They're going to get left out in the cold if they don't get with it in the data area."

Cabletron might also draw the interest of Lucent, which sources said is a major Cabletron customer today. With Cabletron's Spectrum multivendor network management platform, Lucent would have a leg up on rivals Cisco and Nortel Networks. Neither has such a platform or could develop it quickly, one observer said.

"Everybody has the hardware, but network management software takes years to develop," said Kate McRae, an analyst at Renaissance Worldwide, in Portsmouth, New Hampshire.

Most importantly, Cabletron needs to make a move, observers said.

"If they had a bigger company (acquire them) that was more successful with marketing, that would be really good for Cabletron," said Dan Jackson, a network administrator at the University of North Carolina, in Chapel Hill, North Carolina, and a Cabletron user.