FOOL PLATE SPECIAL
An Investment Opinion
by Brian Graney

Is Cabletron Back?

Quick quiz: What has been the top-performing networking products stock so far this year? Has it been Cisco (Nasdaq: CSCO), Lucent (NYSE: LU), or perhaps Nortel (NYSE: NT)? Try Cabletron Systems (NYSE: CS), which was up 65% as of yesterday's close and rose another $3/8 to $14 3/16 this morning on news that co-founder Craig Benson has relinquished the chairman, president, and CEO reins to Piyush Patel, formerly the company's senior vice president of worldwide engineering.

Then again, maybe Cabletron's recent showing isn't so surprising after all. The company arguably had nowhere to go but up after hitting the networking industry's equivalent of the Great Wall of China in the second half of 1997. After topping out at $46 per share in May of that year, Cabletron took the express train to single-digit land in the 18 months that followed. Meanwhile, its larger networking rivals ran circles around the company, which suffered from dragging its feet in latching on to key networking technologies such as routing and gigabit ethernet.

Cabletron's shares started to rally last month after Benson suggested the company may sell or spin-off some of its business units under the noble banner of unlocking shareholder value. While many anticipate a transaction involving the company's Spectrum network management software business will be unveiled sometime soon, others have speculated that Benson was planting a "For Sale" sign in the company's front yard and inviting potential acquirors in the fast-converging telecom-datacom marketplace. That last theory lost some of its bite today with the elevation of Patel, who has been handed the turnaround ball and looks poised to run with it.

As head of Yago Systems (which Cabletron acquired last year), Patel helped develop Layer 3 switching technologies. That know-how has served him well at Cabletron, where he has helped roll out the company's line of SmartSwitch products -- advanced switching devices with routing capabilities. With the SmartSwitch now the company's most popular product line, Patel will look to build on that achievement by focusing his efforts on the enterprise networking and service provider markets.

Whether he can parlay his SmartSwitch success into a smart turnaround for all of Cabletron remains to be seen. Building and launching a successful product is one thing; turning a $2.4 billion company around on a dime and giving the networking heavyweights of the world a run for their money in a fast-growing but tumultuous marketplace requires another managerial skill set entirely.

UPS

Home electronics retailer Circuit City Group (NYSE: CC) logged on gains of $2 5/16 to $77 7/16 as the company said it expects Q1 EPS to be more than 90% above last year's $0.13. That would mean at least $0.25 per share, beating IBES' $0.20 consensus estimate. First-quarter same-store sales at the company's Circuit City stores rose 9% while revenues moved up 13% to $791.4 million.

Reflective safety products maker Stimsonite Corp. (Nasdaq: STIM) shone $3 15/16 to $14 7/16 on news that self-adhesive products company Avery Dennison (NYSE: AVY) agreed to buy the company for $137 million in cash. The $14 3/4 per share deal represents a 40% premium to yesterday's close for Stimsonite.

Online software retailer Beyond.com (Nasdaq: BYND) jumped up $5 5/16 to $22 3/4 this morning as it and Intellisys Technology Corp. won a 65-month, $120 million contract to provide delivery and maintenance of Microsoft Corp. (Nasdaq: MSFT) software to 130,000 of the IRS' desktop computers.

Television broadcasting, plastic film manufacturing, and healthcare product distribution company Chris-Craft Industries (NYSE: CCN) improved $1 1/16 to $47 15/16 this morning as big-shot investor Mario Gabelli told Business Week's "Inside Wall Street'' column the shares should be worth $61 each based on the company's 22% stake in television station owner BHC Communications Inc. (AMEX: BHC) and other assets.

Pharmaceutical developer COR Therapeutics (Nasdaq: CORR) moved up $5/8 to $15 1/8 as Medical Technology Stock Letter editor Jim McCamant told the Business Week column Chiron Corp. (Nasdaq: CHIR) and Schering-Plough Corp. (NYSE: SGP) are possible suitors for COR, which could bring $20 per share in a buyout.

Consumer products giant Procter & Gamble (NYSE: PG) gained $1 1/4 to $94 3/4 after news that it is planning a reorganization to the tune of $2 billion to $3 billion, according to The New York Times. As discussed in this morning's Breakfast With the Fool, "P 'n' G" is reorganizing in an effort called "Organization 2005," under which the company that perhaps defined 20th century consumer products marketing will align itself to the global marketing realities of the 21st century.

Design house Tommy Hilfiger (NYSE: TOM) took on $13/16 to $75 9/16 after the company reported Q4 EPS of $0.97, beating Wall Street's $0.90 consensus estimate. The company also announced plans for a 2-for-1 stock split payable July 9.

Lehman Brothers upgraded its rating on media company Viacom (AMEX: VIA) to "buy" from "outperform," setting a $50 share price target. The stock moved up $2 7/16 to $40 7/8 as Lehman, according to CNBC's Maria Bartiromo, said the company is undervalued as a pure-play content company except for Blockbuster Video.

DOWNS

Disk drive manufacturer and storage systems company Quantum Corp. (Nasdaq: QNTM) shed $1 9/16 to $18. The company said after the close that "first quarter earnings are currently expected to be in the range of $0.05 to $0.15 for the quarter ending June 27, 1999, on sequentially lower revenues. The expected decline in revenue and earnings is attributed to aggressive pricing in the desktop hard disk drive market." The mean IBES estimate for the quarter was $0.32, with a range of $0.29 to $0.41.

Following the lead of reluctant Internet newbie Merrill Lynch (NYSE: MER), brokerage Paine Webber (NYSE: PWJ) lost $1 11/16 to $41 1/16 after saying it plans to make online trading available to its clients by Q3, according to Reuters. The company already has a pilot program that a select group of clients are using; executives said at a briefing that they will offer the services as part of a package rather than join the fight to become the low-cost provider.

Marketing software developer Exchange Applications (Nasdaq: EXAP), which sold 4 million shares of company stock to the public at $22 each -- a 19% discount to last night's closing price -- lost $3 3/4 to $22 1/2 this morning. The company plans to use the proceeds to fund, among other things, research and development and potential acquisitions.

Publishing tools company Inso Corp. (Nasdaq: INSO) softened $7/8 to $6 1/8 on news that the SEC has begun an investigation into the company's previously announced restatement of 1998 financial results. The company said fiscal Q1 losses were $1.22 per share before charges, down from a $0.71 profit a year ago and well off the $0.15 loss estimate one analyst gave IBES.

Musical instruments retailer Guitar Center Inc. (Nasdaq: GTRC) tuned out $4 to $11 1/16 after warning that slowing sales in "certain product categories" are expected to hurt EPS by about $0.04 in Q2. The company expects the trend to reverse in the second half, however, and is looking for a $0.02 per share boost in Q4. IBES' consensus projection for Q2 is $0.19.

Personal care products network marketer Nu Skin Enterprises (NYSE: NUS) flaked off $1 5/16 to $16 9/16 after the company said Q2 EPS could be as much as 10% lower than Street estimates because of delays with its Japanese marketing initiatives. IBES' three-analyst consensus is $0.38 per share. A group of shareholders who were planning a public offering have postponed.

Sporting goods chain Sports Authority (NYSE: TSA) dropped another pass today, losing $3/8 to $4 7/8 on news that May same-store sales fell 6.4%. "We continue to experience sales weakness in men's apparel, footwear and bikes," said CEO Marty Hanaka, and "the outdoor business was not as strong as in recent months." Signs of life came from the casual footwear and, unsurprisingly, baseball departments.

Mutual fund manager T. Rowe Price Associates (Nasdaq: TROW) lost $2 7/16 to $35 5/16 as Morgan Stanley downgraded the stock to "neutral" from "outperform."

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Contributing Writers Brian Graney (TMF Panic), a Fool David Marino-Nachison (TMF Braden), a new Fool Editing Brian Bauer (TMF Hoops), another Fool Bob Bobala (TMF Bobala), a Fool's Fool Jennifer Silber (TMF Amused), Fool at last