Cabletron split-up: One year later

By Phil Hochmuth, Network World |  Networking

One year after Cabletron reinvented itself as four "start-up" companies, users and analysts are giving the move good grades.

Last February, the network vendor announced a major restructuring plan, which involved splitting the firm, with Cabletron acting as a holding company. Another part of the restructuring included the sell-off of nonprofitable business units, such as network technology it had acquired from Digital and its low-end NetVantage switch and hub business.

From the breakup came Riverstone Networks, which sells metropolitan-area network service provider equipment; Enterasys, which makes enterprise LAN gear; Global Network Technology Services (GNTS), which sells professional IT services; and Aprisma Management Technologies, which develops and sells the Spectrum network management platform.

"Looking back after a year, the transformation was absolutely the right thing to do," says Piyush Patel, CEO of Cabletron. As a result of the restructuring, he says, "we've built up good momentum in all four start-up companies. . . . We've made our existing employees more passionate about what they do by bringing a sense of ownership into [the] existing employee base. It has also given us a good platform for recruiting outside talent."

The bottom line has proven the point, Patel says. Each company has experienced individual revenue growth ranging from 5% and 30% over the past four quarters. Cabletron as a whole (counting all four companies and its own operations) has grown by 10% in revenue during the past year. This kind of growth would not have been possible under Cabletron's old business model, he says.

The year 2000 was also tumultuous for many large enterprise network companies, including Cabletron, 3Com and Lucent. Lucent spun off its enterprise arm as Avaya in October, and quickly distanced itself from the new company, with Avaya going public shortly after the spinoff announcement. Unlike the restructuring Cabletron went through, 3Com announced it was exiting the large enterprise market altogether. Unlike 3Com, Cabletron has managed to avoid huge losses and layoffs, Patel says.

But everything has not gone according Cabletron's master plan, however. When the restructuring was announced, four IPOs were mentioned as the ultimate goal of the split. So far, only Riverstone has filed for an IPO, but the company and its underwriters are holding back the completion of the IPO while the market remains unfriendly to most technology stocks.

"Our plan continues to be to bring these four companies an IPO and to do a 100% spinoff in [the] marketplace," Patel says. "That's still the plan."

He says the outlined 18-month timeframe for spinning off each company is still reachable, depending on market conditions.

Join us:
Facebook

Twitter

Pinterest

Tumblr

LinkedIn

Google+

NetworkingWhite Papers & Webcasts

See more White Papers | Webcasts

Answers - Powered by ITworld

Join us:
Facebook

Twitter

Pinterest

Tumblr

LinkedIn

Google+

Ask a Question