In a move designed to boost its product offering, Ericsson unveiled its intentions to acquire Redback Networks. The Swedish telecom company is paying an 18% premium for the data network equipment vendor Redback, which puts the value of the deal at $2.1 billion.
Ericsson was attracted to Redback because the company will extend Ericsson's position in the next-generation IP network market. The build out of mobile and fixed broadband networks, according to Ericsson, is fueling the uptake of IP-based services. "The pace of IP deployment is accelerating as operators move to all-IP converged networks, in which quality of service requires increasingly intelligent routers with higher capacity," Ericsson President and CEO Carl-Henric Svanberg said.
The companies see synergies that will enable them to combine Redback's intelligent routing technology with Ericsson's IP Multimedia Subsystem (IMS), optical transport and broadband portfolio.
Redback has a client roster that consists of more than 700 carriers across 80 different countries.
Under the terms of the agreement, Ericsson will pay $25 per share to purchase Redback. The purchase price represents an 18% premium over the Dec. 19 close price of Redback shares of $21.17.
When the deal closes, which is expected in the first part of 2007, Redback will operate as a wholly owned subsidiary of Ericsson.