By Robin Schreier Hohman
Network World, 4/20/98

Cabletron Systems, Inc.'s newly anointed CEO, Craig Benson, is on a mission to convince the world that he really does back the changes former CEO Don Reed brought about during his eight months at the helm.

Benson said he's going to continue Reed's most important strategies, which include an aggressive acquisition plan and a deeper commitment to the channel.

But Benson has a few ideas of his own, including a greater focus on switching and network management, and the development or acquisition of lower priced products. The Cabletron CEO also pledged to make his firm No. 1 in customer and employee satisfaction.

Benson, one of Cabletron's co-founders, has some financial rebuilding to do, as well. When Reed suddenly resigned from Cabletron at the beginning of April, and Benson took over, the company's stock price had already been falling for months, and the company had reported its first-ever quarterly loss.

Even though Cabletron customers are said to be fiercely loyal, the company has had difficulty expanding its annual revenue beyond $1.5 billion. In most businesses, that would be considered fantastic. In the network business, however, that's not good enough.

Cabletron lags substantially behind Cisco Systems, Inc., which listed $7.3 billion in revenue, and 3Com Corp., which ran up $5.6 billion in revenue, last year. Even Bay Networks, Inc., which has had trouble in the past few years, has managed to get its act together and took in $2.3 billion last year. In 1997, Cabletron reported revenue of $1.41 billion. Fortunately, Cabletron is sitting on a wad of cash, having some half billion dollars available as a cushion or to buy its way into new markets.

Most analysts agree on the reason the company hasn't caught up: Cabletron likes to sell directly, and most sales today are in the channel.

Under former CEO Bob Levine's tutelage, Cabletron in various ways created many enemies among distributors and value-added resellers (VAR) alike. The stories - some true, others probably not - are legion. Some claim that when Cabletron did go through distributors or VARs, the company would snatch the customer back after the reseller put in time and money cultivating the account. Others charge that Cabletron wouldn't provide enough support and training, or it wouldn't give the distributors enough lead time on new products.

So Reed found himself, hat in hand, going to other two-tier distributors, such as Tech Data Corp., to convince them that this was no longer Levine's Cabletron. Reed admitted that distributors, resellers and integrators "haven't felt very good'' about Cabletron. "They saw us as cherry-picking the best accounts and giving them what was left over,'' the former CEO said in March.

Ultimately, success with the channel may come more from Cabletron's acquisition of the networking division of Digital Equipment Corp. than from Cabletron's diplomacy.

The Digital deal, which was finalized Feb. 9, cost Cabletron $430 million in cash and product credits. Cabletron may have bought itself a few new products, but that wasn't the main reason for the acquisition. What Cabletron wanted was channel sales. Digital had them.

Getting into the channel is not the only major change at Cabletron these days. Reed brought in John d'Auguste, who was in charge of manufacturing at Gateway 2000, as president of Cabletron's new Enterprise Business Unit. In April, Benson promoted d'Auguste to president of operations. "We're going to drive the company based on marketing vs. engineering,'' d'Auguste said before his promotion.

That may not sit well with Cabletron's engineers, but d'Auguste isn't the type to let that bother him. "If engineering can create the products, then we will do it internally. If they can't meet the time line, there'll be a question: Do we go to the marketplace and OEM it, or do we buy the company?"

Another key goal for d'Auguste is to lower Cabletron's prices. And d'Auguste said he'll be "re-rationalizing a number of old products.'' Translation: Cabletron will kill off some products. That may include some former Digital offerings, which Cabletron officials estimate overlap with Cabletron products by about 20%.

Cabletron also has big plans for Spectrum, its network management software. Spectrum now will be actively marketed as an all-purpose platform, like Hewlett-Packard Co.'s OpenView.

Cabletron has broached another taboo with the introduction of the SmartSwitch router line, which came from YAGO Systems, Inc.'s multilayer switch technology. The SmartSwitch Router provides wire-speed routing, quality of service, Remote Monitoring 2 accounting and virtual LAN capability.