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AMID MARGIN CONCERNS, CABLETRON CUTS PRICE ON NEW LAN SWITCH

Despite Tuesday’s warning of poor third quarter results (and related restructuring) amid continuing margin declines Cabletron Systems Inc has gone ahead and cut prices on its new SmartStack ethernet desktop switch, the ELS10-26TX. The price cuts will come in the form of a $140 rebate that will be offered to resellers for three months through the distributor Ingram Micro Inc. Cabletron bills the move as a strengthening of its commitment to the channel, but it may point to further problems at an already difficult time, as analysts have pegged the margin problems specifically to the company’s aggressive pricing of LAN switches. The news of price breaks right now can’t do much to build investor confidence, especially as Bear Stearns downgraded the company’s shares from attractive to neutral. They responded to the day’s developments by shedding $0.75 to close at $14.9375, after hitting the lowest point in about three years at $14.375.

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