Reed's departure

Life is full of cliches: What goes up must come down. The check is in the mail. If the shoe fits ... Now add this one to the mix: Cabletron never ceases to amaze.

After a mere seven months on the job as CEO of Cabletron (and only four months without assistance of Bob Levine - who actually stayed on as a consultant), ex-Nynex exec Don Reed is now ex-Cabletron exec Don Reed. Taking his place: ex-Cabletron president and chairman Craig Benson.

During Don's brief term. several key events took place:

Cabletron acquired the Networking Business Unit of Digital Equipment.
Cabletron acquired YAGO Systems, a provider of high-performance gigabit switching technology.
Cabletron embarked upon a new mode of sales, with a focus on external distribution channels, web-based purchasing and restructured direct sales.
Cabletron started laying off workers, including 180 last week.
Cabletron lost $6.3 million in its most recent quarter, with annual revenue dropping from $1.4 billion to $1.38 billion.
Craig Benson remained in charge as the chairman of the board of Cabletron Systems.

The last is perhaps the most important. With all the management changes over the past year, indeed, throughout Cabletron's history, Benson has remained a constant. He was there in the garage in Ashland, Mass. and he was there after Reed took the helm. And he is still there today.

In the days since Reed's ouster, several changes have occurred. First, there were the expected defections from a couple of people who were less than happy with the prospect of Benson riding shotgun again. Second, Bob Levine returned to the lineup (on a part-time basis) to provide some morale-boosting to the sales force (which had just racked up a money-losing year). And third, two key execs hand-picked by Don Reed were promoted to higher-management positions.

But things are far from settled in Rochester, N.H. Just look at some of the rumors running amok this week:

Rumor 1. Cabletron is about to be acquired and Don Reed didn't want to sell until he had a chance to boost the stock price. This is espoused by those who point to Cabletron's recent inventory project as a sign that "people want to know what assets they are buying." Fact: If I just lost money and was planning to do some cost cutting, might I not want to get a handle on what was where before I trim the sails?

Rumor 2. Bob Levine is going to return to take over Cabletron. Fact: That would seem to be inconsistent with the fact that Benson is now the CEO and Bob isn't. Has he stepped in to help motivate the sales team? He sure did (if I owned as much Cabletron stock as he does, I'd be in their face every day!). But that doesn't mean that key players like John d'Auguste and Ken Levine are moving out anytime soon.

Rumor 3. Don Reed has disappeared (this is bolstered by the fact that he did not participate in the press/analyst conference and is supposedly on vacation this week). Fact: He was at least solid enough to sign a letter to Cabletron customers that went out this past Friday (perhaps signed at his beach house?) confirming what was already stated in the formal press announcement.

So what really is going on? Putting aside all the conspiracy theories for a moment, what we can bank on is that Craig Benson felt that he could do a better job at running Cabletron than Don Reed could. Period. It does not matter who suggested it, or why it occurred, it simply is. Again, don't forget that Benson never left Cabletron. He has been watching like a hawk from his position as chairman and I don't doubt for a moment that he has watched every move that Reed made. So after deciding that Reed was the guy to take a chance on last summer, he decided that was no longer the case.

If you ask me, it was the right decision. Cabletron is a very "personal" company that probably didn't fit well with Reed's "big management" experience at Nynex. If anything, this showed that Cabletron is focused enough in the LAN networking space - that it needs not just a strong manager, but somebody who lives and breathes networking. Still, Reed's departure leaves several questions unanswered. For example, what will Cabletron do to catch up with other players. We know its plans call for simultaneous expansion into both the low end of the market and the WAN, along with acquisitions to help it grow.

But what happens next? Benson has admitted that he is not "Mr. Strategy" and Reed may or may not be active in Cabletron's future (being a Cabletron board member is not exactly a full-time job).

But in the meantime, there are lots of people trying to figure out if they should continue to buy Cabletron equipment. I suggest you look at it this way. Despite Cabletron's recent financial downturn (aside from Cisco, which internetworking player hasn't hit some financial turbulence?), the company is still in fairly good shape. Its revenue of around $1.3 billion is nothing to sneeze at, and it has avery low debt. Benson has shown he can get things done, and we have reason to believe he was actually behind many of the acquisitions and other moves over the past six months that are getting Cabletron ready for the future.

I believe that the "turmoil" at the top will be over real soon, and the decision to purchase Cabletron equipment should be made as it would have been two weeks, or two years ago: if the product fits, and you feel comfortable with the technology and product direction, then Cabletron is worth considering. But if the product doesn't fit....