A granite foundationIn 1983, Robert Levine and Craig Benson, a pair of wire and cable salesmen working out of a New Hampshire garage, began selling computer network cables cut to the specific lengths their customers needed. Soon after its founding, Cabletron Systems began installing networks and designing networking equipment and in 1988 unveiled the Multi Media Access Center (MMAC), a wiring hub that simplified network installation. The company went public a year later. The two networking innovators now own 13 percent each of the company they established, a combined stake worth more than $1 billion.
Cabletron introduced the first SCSI-to-Ethernet adapter in 1992, enabling Mac users to connect to Ethernet LANs. Major purchases in 1995 and 1996 included Standard Microsystems, Network Express, and ZietNet.
'Overzealous?'
For much of the 1990s, the company's aggressive sales force and no-frills corporate culture garnered top-notch earnings, and an aggressive acquisition policy kept it neck-and-neck with competitors 3Com and Cisco Systems. But in 1996, the company's steady growth was interrupted by product delays, and customers began to complain about Cabletron's "overzealous," "often roguish" sales and marketing tactics.
A switch in tactics
In 1997, Robert Levine stepped down as CEO and was replaced by Don Reed, who quickly began to turn things around. His first tactic was to switch the company's focus from simple product sales to "solutions provider." Cabletron expanded its product mix to include software and professional services. The next step was to streamline the direct sales force and farm out business to sales channels. Reed then positioned the company for growth through expanded e-commerce operations and international business. Reed also set Cabletron on track for new partnerships and acquisitions. He initiated the purchase of Yago Systems, Inc. and Digital Equipment Corp's networking business, which gave the company a stronghold in the router and switch markets.
Hot potato reins
But Reed was dealing with damaged goods. The company's stock fell to a five-year low, and it laid off 800 employees. After streamlining operations and instituting a strong growth strategy, Reed quit the CEO post after only seven months on the job. He handed the reins to chairman and co-founder Craig Benson. Though some doubted the claim, Cabletron execs claimed Reed's sudden departure came because he had basically accomplished what he was hired to do - create a strategy that would return the company to growth.
Buy or be bought
In June 1998, Cabletron began something of a shopping spree, picking up FlowPoint Corp. and Ariel Corp., two producers of digital subscriber line (DSL) equipment, as well as NetVantage, a manufacturer of Ethernet switches. The company also introduced new products for wireless networks and ATM switch lines. In 1999, the company began some self-assessment. It sold its Irish manufacturing operation, laid off 300 workers, and announced that it would continue to trim its workforce down to 5,000 employees.
Internal troubles weren't the only problem. SEC investigations prompted Cabletron to restate its earnings from the past three years, and Benson resigned the following day. Former Yago CEO Piyush Patel then ascended to the Cabletron helm, but industry analysts speculate that Cabletron is now a prime target for a foreign telecom acquisition. Patel has spun off Spectrum, the company's network management arm, and introduced a SmartSwitch Access product line for dial-up remote access, making Cabletron an appealing telecom equipment provider.
Entirely new directions
Early in 2000, Cabletron announced that it was splitting up. In a radical restructuring, Cabletron unveiled plans to become a holding company for four new entities - Riverstone Networks, Enterasys Networks, Global Network Technology Services, and Aprisma Management Technologies. Patel says, "Each of these companies will speak with clarity of purpose to its shareholders, cutomers, partners, and employees." Cabletron is also looking to expand its business in far-off places such as India, Turkey and Nigeria. It also plans on divesting its DIGITAL Network Products Group and Netvantage divisions, as Cabletron couples its restructuring with a renewed drive for profits.
