Cabletron Revenue Up; Outsourcing Strategy Planned - InformationWeek

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Cabletron Revenue Up; Outsourcing Strategy Planned

Cabletron Systems proved to be on the comeback track today with the release of its fourth-quarter and fiscal 1999 year-end results for the period ended Feb. 28. In addition, the company has outlined a plan to sell its manufacturing assets and begin outsourcing all of its manufacturing operations.

The company saw an increase in revenue for the fourth quarter to $345.1 million, vs. $311.5 million for the same period last year. Excluding charges, Cabletron reported a net income of $2.5 million, or 1 cent per share, for the quarter, an improvement over last year's net loss of $6.3 million, or 4 cents per share. However, Cabletron will take a fixed-asset loss in this quarter for all of the equipment that is being discarded or has been idle in preparation for its outsourcing strategy. When included in the earnings calculations, the company posts a net loss of $8.3 million, or 5 cents per share, for the quarter.

For fiscal 1999, the company's revenue was relatively flat at $1.4 billion, while net loss for the year increased to $240 million, or $1.43 per share, over fiscal 1998's loss of $127 million, or 81 cents per share.

Meanwhile, Cabletron announced its intentions to sell off its manufacturing assets and outsource those responsibilities to Celestica Inc. as part of an initiative the company is labeling Project Ignition. The company says that by alleviating itself of the manufacturing responsibilities, it will be able to save more than $50 million in the first year alone as well as be able to focus on new product development and growth. Utilizing Celestica's expertise in manufacturing will help Cabletron improve its time to market and lower the costs of delivered products, according to a statement by John d'Auguste, the president of operations. So far, the company says 300 of its employees in the Ohio location will be laid off.

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