IRS helps Enterasys earnings rise

Enterasys Networks Inc. finally made money last quarter thanks to the Internal Revenue Service. Its share tock price also shot up on Monday, but the increase was due to a new 1-to-8 reverse stock split instituted by the firm.

The Cabletron Systems spin-off earned $72.9 million for its third quarter – a result that includes a $73 million IRS refund.

The company had previously overpaid its taxes due to inflated revenue reports — reports that resulted in indictments (and some guilty pleas) for several former executives in an ongoing investigation.

Without the refund, the company lost $811,000, with some $789,000 due to “restructuring, asset-impairment and other charges.” The company had reversed its workforce considerably, and had various severance and other costs associated with that.

But the loss is considerably less than those in previous years, partly because the company earned $81.8 million in revenue. That leaves the company with $115.1 million of cash.

Shortly before the announcement, Enterasys revealed that the board approved an the reverse stock split, sending the stock price up from slightly above $1 at close on Friday to open Monday at $7 a share. – BOB SANDERS