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CEO chops Cabletron into four chunks

By Jim Duffy
Network World, 02/14/00

ROCHESTER, N.H. - Cabletron last week said it will split itself into four independent operating companies, ending a reorganization that began with the resignation of founder and CEO Craig Benson last spring.

The companies - Riverstone Networks, Enterasys Networks, Global Network Technology Services (GNTS) and Aprisma Management Technologies - will focus on service provider, enterprise network, professional services and network management markets, respectively. Cabletron will operate as a holding company for the four units, which will be taken public within the next year.

Company CEO Piyush Patel says this course of action will give Cabletron the "focus and agility" to seize opportunities in the markets targeted by the new companies, and to better serve customers. He also says the move will increase shareholder value, something Cabletron has been striving to do since late 1998 when it surprised Wall Street with a money losing quarter.

Since then, Cabletron has sold off its xDSL business, outsourced its manufacturing and realigned itself to focus on the four key market segments its operating companies will target.

The turning point, though, was when Benson resigned in June after more than 15 years at the company he co-founded in a New England garage. He was succeeded by Patel, who joined Cabletron with the company's acquisition of start-up Yago Systems two years ago.

"We have accomplished much over the last year," Patel says. "We are now at the point where we believe that the business is capable of accelerating its growth. . . . It has become clear to us that to take advantage of the growth opportunities, we must separate into more targeted businesses with a start-up company drive and culture."

Cabletron customers were not blindsided by the move. Indeed, they took it in stride.

"I sort of had inklings this was coming; they already did the Aprisma thing," says James Wiedel, director of networking at the University of Southern California in Los Angeles. "It's not really too surprising."

Wiedel expects his dealings with the Cabletron companies to be "business as usual," but in the future things could get "interesting," he says.

"We'll see if some of them jump ahead of the competition or whether they become objects to be eaten by other companies," Wiedel says. "This may be a setup for buyouts for the various parts. I think we have to wait and see."

Patel, who will be chairman of the holding company, says the breakup will enable each company to compete effec-tively in its target market to the point of attaining the No. 1 or No. 2 market share position.

Riverstone will be led by Romulus Pereira, who had been Cabletron's chief operating officer. Riverstone will focus on Web hosters, application service providers, competitive local exchange carriers, ISPs and alternate carriers.

Enterasys will be led by Henry Fiallo, who had been Cabletron's chief information officer. Enterasys will focus on large enterprise network customers.

GNTS will be led by Earle Humphreys, who was Cabletron's executive vice president of global services and support. GNTS will provide professional services, including the design, performance, management and security of networks for large enterprise and service provider customers.

Aprisma Management Technologies will continue to be led by President Michael Skubisz. Aprisma, formed last June, develops infrastructure management software for the service provider and enterprise network markets.

Cabletron's SmartSwitch and SmartSwitch Router products and technology will be shared among the companies under reseller, OEM, joint intellectual property ownership and other business arrangements, Pereira says. Initially, Cabletron's products will maintain their current price, form factor and functionality, but will diverge over time to best suit the needs of each company, he says.

The Cabletron brand, meanwhile, will remain with the holding company, and company officials say they intend to leverage it going forward. But at some point they may elect to retire it, they say.