Cabletron Sells Manufacturing, Repair Units

Cabletron Systems Inc. today announced it will sell its product manufacturing and repair operations to Flextronics International Ltd. of California for US$100 million.

Under the deal, Flextronics will hire Cabletron's worldwide manufacturing work force of approximately 1,000 located in Rochester, New Hampshire and Limerick, Ireland.

The move will "allow this highly skilled and dedicated work force to remain employed in the localcommunity," said Cabletron CEO Piyush Patel in a prepared statement.

The Flextronics deal appears to confirm nine-month-old rumors that a similar deal between Cabletron and Celestica of Canada - announced in March 1999 - was scuttled. Cabletron says the Celestica deal was restructured shortly after it was announced and that Celestica is now one of several contract manufacturers handling half of Cabletron's manufacturing requirements.

Flextronics handles the other half, a Cabletron spokesman says. Celestica did not return phone callsseeking comment, but the March 1999 press release announcing the Cabletron deal has been pulled from the Celestica Web site.

The rumor, meanwhile, had it that then Cabletron CEO Craig Benson flew into a rage upon learning thatCelestica would use Cisco routers to help run its manufacturing operations.

Benson then destroyed that

Cisco equipment, Celestica scrapped the deal and Benson resigned shortly thereafter, the rumor goes.

Cabletron did not confirm the rumor at the time but said the Celestica deal was on track (NW, June 21,1999, page 6). Celestica did not return phone calls at that time either.

Today, the Cabletron spokesman - who was not with Cabletron last spring - would not comment on the rumor.

The Flextronics deal allows Cabletron to continue to focus on its core competencies while divesting itself of nonessential assets, including outsourcing all of its manufacturing operations, Patel said in the statement.

Observers note that this move, along with the sale and closure of its Flowpoint and Ariel DSL subsidiaries, respectively, may be intended to make Cabletron more attractive to potential acquirers (NW, Nov. 29, 1999, page 6).

In addition to unloading a nonessential asset, the Flextronic deal allows Cabletron to increase itscompetitive position by improving time-to-market, quality, competitive pricing flexibility and lowering cost of goods; and offer economies of scale on component sourcing and manufacturing operation, the company said.