Cabletron to acquire and invest in Indian companies

Cyber News Service

BANGALORE: Cabletron Systems, the $2-billion networking major which announced the transformation of its business model by spinning off the company into four entities and repositioning itself as a synergist, is extending its little-known role as a venture capitalist and has plans to invest in Indian companies. It is currently in talks with four to five large companies and is in fact close to investing in three Indian start-ups. Piyush Patel, President, Chairman and CEO, Cabletron Systems, speaking to select Indian media post the transformation of Cabletron, said, "This is the right time to invest in India. Some of the big companies, which are not into IT but interested in IT, are speaking to us. Through this we may jointly get into IT."

Cabletron, which has invested in 15 companies and plans to invest in 15 more companies soon in the US, is looking into areas, which are into IT, Telecom, complete solution providers and IT consulting companies. Currently, it is in talks with two System Integrators in India to enter the SI segment immediately. Interestingly enough, Patel, who believes in growing through acquisitions, also have plans to acquire a few Indian companies. It is already in talks with some of them.

Cabletron was recently spun off into four subsidiaries--Riverstone Networks, Enterasys Networks, Global Network Technology Services, and Aprisma Management Technologies. Explaining the logic behind it and the repositioning of Cabletron as a synergist, Patel said, "We fundamentally want the four subsidiaries to focus on the key high growth areas of the communications marketplace: service providers, enterprise e-business, professional services, and infrastructure management, respectively."

The whole idea is to give start-up kind of mentality to accelerate the growth and take Cabletron to the next level of growth. "This transformation is intended to allow us to serve customers even better, by creating entities exclusively focused on meeting their particular networking demands," he added. However, Cabletron will continue to leverage its brand name and products of its four subsidiaries will have their name and logo under the Cabletron name. Additionally, all customer related transactions will be dealt with by Cabletron itself. "We will continue to do business as usual. The entire customer interfacing will be kept the same. Through this, the customer will get better service and our focus towards customer is kept intact," said Mr Patel.

He even has plans of going for IPOs for the four companies as a means of growing and standing on its own. The plan is to have a two-stage sub-IPOs for these four companies. In the first stage, four months from now, 20 per cent of these companies will be spun off in the open market. In the second stage, which is in the next 6-9 months, remaining 80 per cent will be distributed among Cabletron shareholders. He said, "The sub-IPOs will allow them to grow fully, each of these companies has to stand on its own and they have to find their own destiny."

While there are chances that these subsidiaries, if successful, may get acquired at a later date by some other company, it is a possibility that has already been looked into by Cabletron, and, better still, is something it might encourage. He is of the opinion that "If they are very successful and if somebody wants to acquire them, Cabletron shareholder is the winner."