After splitting up Cabletron, Piyush Patel mulls his future
ROCHESTER, N.H. When Piyush Patel took over as chief executive officer at Cabletron Inc., he had a vision for the company. It did not include him.
Patel assumed the top job at Cabletron in the summer of 1999. Once in the vanguard of networking-equipment manufacturers, the company had become an also-ran behind rivals such as Cisco Systems and Nortel Networks.
Patel's solution was dramatic. He carved Cabletron into four separate companies: Enterasys Networks, Riverstone Networks, Aprisma and Global Network Technology Services. Each would have its own name and chief executive, and be independent of the others. It was a long process, but by last August Cabletron ceased to exist and Patel found himself out of a job.
It is exactly where he wants to be.
"I'm on a sort of sabbatical for one year after working hard for six years," Patel, 47, said in a recent interview. "Right now I'm going to force myself not to do anything for awhile."
Catching up with Patel since his Cabletron departure is not an easy task. The native of Gujarat province flew home to visit friends and relatives for two weeks in December, his first trip back to India in 13 years.
Then came a jaunt to California to chat with a few venture capitalists. Not surprisingly, they were eager to chat with a man who has both launched a successful start-up and run a billion-dollar company.
In the mid-1990s, he was a founder of Yago Systems, a telecom start-up eventually acquired by Cabletron.
After all his recent travels, Patel returned to his home in Dover, N.H. Now he relaxes there with his wife and two sons, considers his future, and thinks big thoughts about the telecom industry.
Patel still keeps an office at the old Cabletron complex, now part of Enterasys Networks, but has no official title or duties with the company. He also serves as non-executive chairman of Riverstone Networks, and stresses that his duties are mostly ceremonial.
"I'm taking a backseat to running the company," he says.
Patel says he knew from early on that he should step aside from Cabletron after the four-way split. He became chief executive officer in June 1999 and announced the reorganization in February 2000, knowing it would take about 18 months to divide up all the assets and take the new companies to the public markets.
The logic was to create four smaller companies that could focus on their core markets with more intensity. To that end, each would need a chief executive without the distractions of managing the Cabletron dissolution. "At that point I had to make a decision," Patel said. "I couldn't run Cabletron and all these companies."
By February 2001, when Riverstone was spun off and the break-up plan was halfway complete, "my job was to act as a coach and to make sure the companies moved forward." Cabletron formally ceased to exist on Aug. 6, 2001.
Industry observers say Patel's motive to divide up Cabletron was clear: He needed a way to get more value from the company's undervalued stock. Since Cabletron could never do that by competing against rivals Cisco Systems, Lucent Technologies or Nortel Networks, Patel had to create new companies that could stand on their own.
"In the environment when that decision was made, Cabletron had to break up to unlock its value," said Ilya Grozovsky, an analyst with the Soundview Technology Group in Connecticut. "If Cabletron were around today, it would be a $5 stock."
Unfortunately, recession gripped the telecom industry after Patel decided to split up Cabletron, and the stocks have been hammered anyway. Riverstone Networks now trades around $7.50 per share. Enterasys had traded around $10 per share until early February, when it disclosed an investigation by the Securities and Exchange Commission; shares have since plummeted to $4. Aprisma is still a subsidiary of Enterasys, and will eventually be spun off once the company clears up its SEC troubles.
"It's a little difficult to talk of the wisdom of the move unless you remember the time the decision was made," Grozovsky said. "He did well given the cards he was dealt."
While he enjoys his year off, Patel contemplates his next career move. He acknowledges that the start-up environment "where they're so energetic they're bouncing off the walls" still has its appeal.
"If I have a clean slate, yes, I'd like to start another company," Patel says.
He does have advice for new entrepreneurs trying to break into the telecom industry: know your product, deliver it on time and on budget, and know who is going to buy it. He cited his own Yago Systems, which completely built a switch for less than $5 million in venture capital, as a good example.
"Execution is the game now. The team that can deliver the box and target the customers in the right way will do all right," he said. "If you need another $30 million, the VCs will say no way," Patel said. "But if you say you only need another $3 million, they might well go for that."
After his talks in January with several venture capital firms, Patel says he expects to join the corporate boards of at least a few telecom companies. He previously served as a board member for Coola in Woburn, Mass., a wireless-software company that existed for two years but went out of business this month.
Patel is bullish on the long-term prospects for the telecom industry, even though he believes different sectors will recover from the recession at different speeds. He cited recent favorable sales forecasts by Cisco Systems as proof that the market has at least stabilized for 2002 and 2003. Growth this year will be "nothing huge," he says, but "there are business drivers that still exist for spending money."
In particular Patel is optimistic for the "metro" sector of telecom, where customers are wired up to their local urban networks. Switches that connect business customers to those metro networks and to let telecom carriers sell new services to those customers- should be popular products.
Riverstone Networks makes such a product, as does Gotham Networks. Other telecom companies, both start-up and giant alike, are scrambling to get into the sector as well.
"It's all about new services," he says, "squeezing more revenues out of the customers."