By Jo Maitland
Cabletron is on the verge of selling or spinning off Spectrum, its network management business, according to a senior executive. It is also considering selling a minority or majority interest in its three other divisions: enterprise networks, service-provider networks and professional services.
Robert Travis, director of analyst relations told ComputerWire: We have entered phase two of Project Ignition which started with the restructuring of the business into four units. We are now exploring all opportunities for these divisions, everything is up for debate. The company has drafted Merrill Lynch & Co back on board for advice.
A Gartner Group analyst said: Cabletron has been steadily losing ground since consolidation in the market started with Nortel acquiring Bay Networks a year ago. Its stock is getting weaker and it is unable to compete with the muscle behind players like Cisco, Lucent and Nortel Networks. He said, Cabletron has a large installed base of customers in the enterprise market which makes it an attractive acquisition for carrier equipment makers, such as Alcatel, Siemens and Nokia that all want a foothold in data networks.
Cabletron was reported to be looking for a buyer back in January and hired Merrill Lynch & Co to begin the search. It was said to be seeking $2.5bn from the deal although its market value at the time was around $1.5bn.
In March, the company announced it was signing its worldwide manufacturing operation over to Celestica, laying off 300 employees as a result. Cabletron then announced a new business model, called Project Ignition, to try and reduce expenses, increase cash and lower costs. As part of this project the company re-aligned around four new divisions: Spectrum software (currently just 4% of revenues); enterprise; service providers; and professional services (currently 20% of revenue). This was followed by poor fourth quarter results, down on analysts expectations.
