Ericsson to buy Redback Networks for $US2.1 billion

Stuart Corner
Wednesday, 20 December 2006 14:52

IT Industry - Deals

Ericsson is to buy Nasdaq-listed leading edge router manufacturer, Redback Networks for $US21  billion, making it a much stronger competitor to Cisco and Juniper Networks. The deal is expected to be completed in early 2007.

According to Ericsson, the acquisition of Redback will play a key role in its strategy to help telecommunications carriers lower costs and upgrade their networks for broadband, telephone, video and mobility services. Redback will retain its management team and operate as a wholly-owned subsidiary of Ericsson and will accelerate its product development and expand its operations to meet growing customer demands for next generation broadband networks.

The deal is likely to deal Redback's rival router maker, Juniper Networks a double blow. It will give Redback much greater financial resources and market access and Ericsson is presently a reseller of Juniper's routers, a relationship which may not continue. The two companies formed a joint venture in 2000, Ericsson Juniper Networks Mobile IP, 60 percent owned by Ericsson, to provide mobile Internet routing products to wireless network operators building GPRS and 3G networks. According to Ericsson it aimed to "combine our mobile IP expertise with Juniper's competence in IP routing systems to facilitate the interaction between mobile voice networks and IP data networks."

Redback president and CEO, Kevin DeNuccio, said: "We believe Redback now will have the global reach and financial resources to accelerate its own routing technology innovation and grow market share faster than our traditional routing competitors."

According to Ericsson CEO, Carl-Henric Svanberg, "Redback has always had a well-known technology advantage over its larger routing competitors in broadband services edge routing. We believe the combined strengths of both companies in mobility and IP routing will create significant value for customers and shareholders."