Nortel Should Buy Redback

Here’s a suggestion for Mike Zafirovski as it works to give Nortel some competitive mojo again: acquire edge router maker Redback Networks. Why? For one, Redback seems to be a on roll given it plans to double its workforce to 1,200 from 600 over the next year. So what’s behind Redback’s bullish hiring plans? Redback believes the “explosion” of Web-based services such as IP-TV, VOD and VoIP will jump-start demand for core routers – a business where Nortel stumbled when its much-vaunted Neptune project hit the skids last year. As well, Redback’s excitement about IP-TV, VOD and VoIP are the same markets that Nortel sees as its strategic priorities. So what would it cost for cash-challenged Nortel to acquire Redback? At current trading levels, the price-tag is $853-million. If you add on a takeover premium, you may be talking about $1-billion. Tempted, Mike Z.?

Update: Some more food for thought is a post done by Barron’s a few months ago looking at Technolog Crossover’s decision to buy 2.3 million Redback shares

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One Response to “Nortel Should Buy Redback”

  1. Say it be so Says:

    Interesting concept – but with Cisco and Juniper already holding 80%+ of the edge/core router market, I don’t see how this would fit in with Mike Z’s 20% market share plan.

    Redback’s strength has always been broadband aggregation. This deal would make more sense if Nortel had continued with the JV with Huawei. Otherwise, it’s left with a huge gap. No real customer devices (although perhaps LG has something in the pipeline) and no broadband access products.

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