Cabletron to put its hands on DEC?

Rochester, N.H. - Cabletron Systems, Inc. seems about ready to give into the new rules of competitive warfare in the interetwork equipment market.

After sitting on the sidelines watching Cisco Systems, Inc., Bay Networks, Inc. and 3Com Corp. bulk up by buying other companies, Cabletron is reportedly close to buying Digital Equipment Corp.'s network division. The deal, worth an estimated $400 million to $500 million, would give Cabletron the equipment it needs to help build large backbone networks, including those of telephone carriers and Internet service providers.

The crown jewel of the acquisition would be Digital's GIGAswitch platform, which Cabletron could pit against Cisco and Bay's high-end switches. The purchase also would broaden Cabletron's low-end product line with the addition of access routers and network interface cards.

As for Digital, shedding its network division, in conjunction with the pending sale of its Alpha chip division to Intel Corp., would let the company concentrate on its computer and network integration businesses, analysts said. Digital also would receive a healthy infusion of cash.

Neither Cabletron or Digitalwould comment on the rumors. But Cabletron's new CEO, Don Reed, has said he is looking to build the company's revenues from about $1.5 billion to the $5 billion range of competitors Cisco and 3Com. He did not rule out acquisitions to achieve that goal.

Crown jewel

Along with the GIGAswitch hardware would come an impressinve list of Digital GIGAswitch customers: Sprint Corp., Netscape Communications Corp., InfiNet Co., an ISP and electronic publishing venture owned by Landmark Communications, Inc.,Knight-Ridder, Inc. and Gannett Publishing Co., and US CYBERSITES.

Sprint uses the GIGAswitch/FDDI switch in its New York Internet access point.

Sprint also uses GIGAswitch/FDDI boxes to support SprintLink, the Sprint Internet backbone, and for its corporate network as well.

Acquiring Sprint as a customer would fit with Reed's goal of selling Cabletron products to carriers as a way to boost its revenue.

The GIGAswitch would augment Cabletron's MMAC-Plus, the durable Swiss Army knife switching chassis with packet and cell backplanes. The MMAC-Plus can be fitted with cards supporting Ethernet, Fast Ethernet, Gigabit Ethernet, token ring, FDDI and ATM.

But the venerable MMAC-Plus box could use a youthful partner, according to Steve Bell, president of Bell Consulting Inc., a consultancy in Cupertino, Calif. "The GIGAswitch is a more modern architecture with better throughput and without the baggage of the MMAC," Bell said.

As for Digital, unloading its network division would lighten the load it has been staggering under for years, analysts said.

Digital then could focus on being a systems integrator, selling its own products but also pushing gear it buys from others. And that can be profitable, said Virginia Brooks, an analyst with Aberdeen Group, Inc. in Boston.

Rumors have been swirling for years that Digital has been trying to unload the division (NW, May 30, 1994, page 1). The company never seemed to recover from the days when it was an overwhelming presence in the market. "In the heyday of DEC they told people what the technology should be, and they haven't adjusted well to the new reality," Bell said.

One area Digital did well in, though, was selling to the Asia-Pacific region where Cabletron is weak, Johnson said.

Users seem OK

The University of Southern California, a large Cabletron customer, actually tried the GIGAswitch about two years ago when shopping around to speed up its 13,500-node network. Ultimately, however, it went with Cabletron's FDDI SmartSwitch for the MMAC-Plus, said James Wiedel, director of networking for the Los Angeles campus.

If Cabletron does acquire the GIGAswitch, Wiedel said he would definitely consider upgrading to it. "As long as they can make it run SecureFast (Cabletron's virtual networking management platform) and get the price point."