Cabletron likely candidate for takeover: users

Despite successes with its local operation, local users yesterday fuelled industry speculation Cabletron is facing an imminent takeover, following expectations its US operation will yield another quarter of disappointing financial results.

Cabletron is expected to report a Q3 operating loss of 10 cents a share before non-recurring charges on revenue of $US330 million to $340 million on December 21. Revenues for the same period last year were $331.8 million. Australian results will not be announced until after the US results.

Keith Heale, acting head of network services in the IT services division at Monash University in Victoria, told Network World Today although he was "not terribly worried" about the Australian operation, he does "think Cabletron is a possible takeover target".

"If they don't do well in the stock exchange, they] are likely to be taken over," he said. Heale said he has more long term concerns regarding the company's ability to continue producing "state of the art" products.

"The concern about Cabletron is that one would have hoped it would have expanded - it has been static - [therefore] the amount of cash flow into network products has to be limited," Heale said.

Heale reports Monash University uses Cabletron's Ethernet switches and Spectrum management tools.

Darryl Bond, NRG Gladstone's IT manager, said while he is not "especially worried" about Cabletron's future in Australia at the moment, he is cautious about the reports coming from the US.

"I am cautious about what the share market says and what is reality . . . [they are] two totally different things," Bond said.

"It bought Digital's network business for $430 million or something - if that doesn't make any company hiccup for a while I don't know anything that would."

Bond said: "If you are worried about people going broke - you'll never buy anything or just buy from the biggest company."

According to Ian Fewtrell, Cabletron Australia's managing director, the local operation is not seeing the same issues its US parent faces, with significant growth over past quarters.

"Australia, due to its location on the globe, is fairly autonomous. We have seen great acceptance of product," Fewtrell said.

Fewtrell said he doesn't know enough about the US market to determine why Cabletron is struggling in that market space.

Copyright © 1998 IDG Communications, Inc.

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