Cabletron saw itsshare price last week wiped out by a thirdafter issuing a profits warning.
The networking company announced that it expects first quarter earnings to be around $0.37 per share, 13 cents less than analysts' predictions. It claimed revenues for the quarter, ending 31 May, will be between $360 million (#225 million) and $370 million. This will compare to $324 million for the same quarter last year. Final results will be released on 23 June.
Following the announcement, millions of dollars were wiped off the value of the company's stock, which tumbled from an all-time high in May 1997 of $46.50 to almost an all year low of $30.50.
A UK spokesman for the company dismissed the results as "a temporary hiccough". He predicted that the share price will soon rise, claiming the news did not herald a long-term decline.
"The stock price reflects the fact that this is the first time in our corporate history that this has happened," he explained. "It will recover."
The spokesman blamed the poor showing on a slowdown in sales cycles as products become more sophisticated, requiring a higher level of investment from customers. "As there is more widespread industry acceptance of new technology such as VLANs (Virtual Lans), there will be greater take-up in the high end and sales will improve," he predicted.
Europe was singled out as responsible for the sluggish in sales. Chief operating officer Craig Benson said Europe fell substantially short of its targets for the quarter. The UK spokesman said the UK's performance "could have been a little better, but we're not displeased".
However, rival networking manufacturer Xylan was quick to react with a different explanation. "Cabletron's problem is that its business relies on hubs, and hubs will be dead next year," argued Rene Arvin, general manager of Xylan in Europe. "It will go the same way as UB Networks (the troubled networks vendor bought by Newbridge Networks early this year). It's just not able to move fast enough into new markets."
Cabletron issued a guarantee that there will be no job cuts or restructuring as a result of the under-performance.
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