Telefon AB L.M. Ericsson’s agreement to buy Redback Networks Inc. for $2.1 billion reflects how the explosion in video and other multimedia services over the Internet and a surge in broadband subscribers are driving phone and cable companies to upgrade their networks and spurring big makers of networking hardware to unite.
Ericsson, a Swedish provider of equipment and services for telecommunications infrastructure, said it will pay holders of the Silicon Valley seller of routing equipment $25 a share, or 18% more than Redback’s share price before the announcement. Ericsson characterized the price as a 60% premium above the 90-day average for Redback stock.
The companies said the deal will make them more effective suppliers for the fast-moving market. It also could help Redback contend with larger competitors such as Cisco Systems Inc. and Juniper Networks Inc.
At the end of the day, don’t the phone companies always buy the Internet companies?