6 billion in 2006 continued the CEO of Ericsson

The consolidation of the telecoms equipment sector is continuing. A much smaller scale that the purchase of Lucent by Alcatel or rapprochement between Siemens and Nokia, Ericsson continues also to shopping. One year after the hands on the British Marconi to strengthen in fixed infrastructure, he announced Tuesday evening, the redemption of the American manufacturer of Redback Networks routers to 2.1 billion in cash (EUR 1.6 billion). This amount provides a premium of 18 Redback Tuesday and 60 on average of the last three months. He values the Californian company 70 times its profit per share for 2006 and 45 times higher than in 2007, according to the consensus established by Bloomberg. "Ericsson is forced to pay prices comparable to what was practised for the telecoms bubble to get their hands on a deemed Corporation with strategic technologies," judge Alexandre Peterc, analyst with Exane BNP Paribas.

This acquisition enables Ericsson to better respond to the request of the telecom operators wishing to migrate their networks to the Internet Protocol (IP) and thus offer new services such as television on ADSL. "Services"triple play"will bring operators in bandwidth demand," said Carl-Henric Svanberg, the CEO of Ericsson. And to add that these services need to strengthen the capacity of routers.

Founded in 1996 and with 800 employees (including 500 engineers), Redback is specifically specialized in these traffic IP aggregation routers located at the end of the network (i.e. the part of the network linking connected buildings and the long distance network) and to manage capacity in bandwidth for final consumers. "Even after the acquisition of Marconi, this link was always to Ericsson, says Jean-Charles Doineau, analyst at Ovum." Very few manufacturers specialize in these routers. "The Swedes had sold its stake in Juniper to 580 million euros in 2001, while Nokia was entered in the capital of Redback in 2002 until it is placed in bankruptcy the following year. In the same sector, Alcatel had acquired the Californian TiMetra for 150 million dollars in shares three years ago.

Stable market share

Today, Redback is number four of the sector with 7 of the market, according to the Institute Dell'Oro, after Alcatel (13), Juniper (16) and far behind Cisco (57). Its market share remained stable in the third quarter, then the Chinese Huawei has invested the niche. "Redback is available that half of a market estimated at $ 3.6 billion in 2006, continued the CEO of Ericsson." In 2009, it will target almost of a market weighing 5 billion.

By putting hands on Redback, Ericsson hope to be better placed to win contracts "triple play", a sector dominated by Alcatel-Lucent. "There is an ongoing battle between Ericsson and Cisco to become the alternative to Alcatel-Lucent in television over IP", notes an analyst for Prudential interviewed by "Dow Jones". This purchase also allows the Swedish group to strengthen in certain large operators such as Telefonica, Deutsche Telekom, China Telecom, all customers of Redback. Above all, says Ovum, it thus puts one foot in the door "of the main American operators who use all Redback solutions".