Ericsson to Pay $2.1B for Redback Networks

Telefonaktiebolaget LM Ericsson has agreed to acquire Redback Networks, a maker of carrier edge routers, for US$2.1 billion.

Redback, in San Jose, Calif., makes routers for delivering voice, video, data and mobility services at the outer edge of carrier networks. It will become a wholly owned subsidiary of Ericsson, the Swedish telecommunications giant, but will retain its management team, it said in a statement.

Carriers that once delivered simple DSL Internet access are now delving into voice over IP, video and other services. As a greater variety of carrier services is delivered via IP networks, the devices closest to end users who consume those services have a more complex job to do.

Founded in 1996, Redback has beaten some bigger rivals by focusing on multiservice router technology. After the acquisition, which is expected to close in early 2007, the company will accelerate its product development and gain global reach and financial resources, Redback said.

Kevin DeNuccio, Redback’s president and chief executive officer (CEO), will report to a management board led by Ericsson President and CEO Carl-Henric Svanberg. Ericsson will make a tender offer for all outstanding shares of Redback stock at $25 per share. Before the deal was announced Tuesday, Redback (RBAK) shares on the Nasdaq had closed for the day at $21.17. 

-Stephen Lawson, IDG News Service (San Francisco Bureau)

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