Cabletron snaps up half price bargain at Digital

Acquisition Digital bows out of network manufacturing with $200 million sell-off.

Digital has off-loaded its networking division to Cabletron Systemslion sell-off. for less than half the expected selling price.

Cabletron is believed to have paid under $200 million in cash for the network equipment division, which includes Digital's products and its customer base.

According to widespread speculation, the division was valued at between $400 million and $500 million (PC Dealer, 19 November) . The deal was expected to be announced on 25 November.

To reduce the amount of cash needed up front, Cabletron will give $300 million of product to Digital as part of the sale. In exchange, the hardware manufacturer has agreed to purchase over $1 billion of Cabletron hardware and software products over the next three years in a move that will see Digital reselling Cabletron products.

The buyout is seen as part of an attempt by Don Reed, Cabletron chairman and CEO, to generate 50 per cent of Cabletron's business from international sales. He has announced ambitions to turn the vendor into a $10 billion company by the turn of the century.

It is understood that the computer network equipment business will be run as a separate unit and retain its own management, which will ultimately report to Reed in order to minimise the level of disruption to the channel.

Digital has been trying to off-load its networking division for the past three months as it attempts to focus on its core hardware business of PCs and workstations. The Cabletron takeover is the latest in a series of sell-offs by Digital, following the vendor's undertaking to embark on a restructuring programme after sustained losses between 1991 and 1994.

The acquisition of the unit is understood to be one of a number of buyouts expected from Reed, who has already outlined an 'aggressive strategy to acquire'.