Digital Equipment has agreed to sell its once high flying networking division to Cabletron Systems for $430 million in a deal which will include cash, stock and product credits. The agreement comes after months of speculation over the future of the Network Products business which Digital has denied it would sell for several months. The unit will become a Cabletron company with some Cabletron products added to the line, but officials confirmed it would retain the Digital brand. Digital, will now focus on services and systems integration. "Working with Cabletron, we will continue to provide our customers with the world-class network products they have come to expect from the Digital brand," said Robert Palmer, chairman of Digital. However, only last month Digital denied it was contemplating any sale and issued a private assurance to its channel that it would retain the networks division to help drive its other businesses. "Our mission statement is to build network solutions - it would be rather difficult to do this without products. We want to be the number one switch vendor," said the confidential statement. The networking business has consistently been one of Digital's best performing businesses but has faced increased competition from other network hardware vendors and has lacked a solid product line in 100Mbps Ethernet technology to which many users are upgrading. Palmer admitted the company had left the networking business because it did not "have the necessary scale," to compete with the likes of CISCO. The structure of the agreement, which is expected to be finalised within two months, is similar to Digital's recent deals with Intel for its Alpha chip business and Genicom for its printer business. In each, Digital sold a unit but continued to buy back products to sell as part of a systems integration package.
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