Ericsson Targets Edge Routing with Planned Redback Acquisition

Aiming to add edge routing to its broadband networking portfolio in support of video and mobile services, Ericsson Corp. has announced plans to acquire Redback Networks Inc. for $1.9 billion.

Redback makes the multiservice routing platform which helps operators deliver broadband services such as VoIP, IPTV and VoD. Based in San Jose, Calif., Redback Networks said it has more than 500 carrier customers worldwide.

“This is a big step for Ericsson, a move not only into wireline networking but into IP,” said Tom Nolle, president of CIMI Corp. “With competitors massing up through mergers and acquisitions, Ericsson either has to gobble up some key assets of its own or be marginalized in the world telecom equipment market.”

The deal is the latest in an ongoing trend of consolidation among large networking vendors and comes just weeks after Alcatel and Lucent received approval for their mega-merger.

The question is “whether the broadband remote access system (BRAS) story Redback brings is enough to get Ericsson a place at the table in big metro buys in the future?” asked Nolle, adding that carriers are increasingly realizing that their metro investment is their key planning focus for 2007 and beyond, and that the metro network is a lot more than BRAS or IPTV.

Ericsson and Redback believe there is market opportunity to upgrade more than 2 billion wired and wireless users worldwide over the next 10 years to all IP-based broadband infrastructures. This opportunity, they added, is 10-times larger than the 250 million broadband users today.

The deal is expected to close early next year, pending regulatory approvals, at which point Redback will operate as a wholly owned subsidiary of Ericsson and retain its management team.

The acquisition of Redback will play a key role in Ericsson's strategy to help telecommunications carriers lower costs and upgrade their networks for broadband, telephone, video and mobility services, the companies said.

"Video changes everything about networks today," said Kevin DeNuccio, Redback president and CEO, who will report directly to a management board chaired by the president and CEO of Ericsson, Carl-Henric Svanberg. "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."

Ericsson Corp. www.ericsson.com  

Redback Networks Inc. www.redback.com

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