RealTime IT News

Nokia Takes Equity Stake in Redback

Finnish telecom giant Nokia purchased a 10 percent stake in Redback Networks as part of plans to jump into the broadband space.

The transaction, which comes on the heels of persistent merger rumors between Nokia and Redback , also gives Nokia an option to nearly double the equity stake.

Nokia, which is struggling to maintain its top spot in the fiercely competitive mobile phone market, said the deal would increase broadband solution sales and access to strategic customers. No financial details of the transaction were provided.

San Jose, Calif.-based Redback sells equipment to telcos and ISPs that help to manage the services and accounts of their broadband subscribers. The Nokia alliance is seen as an attempt to expand beyond its flagship broadband router offerings to stave off heated competition in the contracting telecom space.

"Nokia and Redback will expand their existing commercial relationship to include global distribution of wireline intelligent edge and broadband access products," Nokia said in a statement.

Nokia, which also gets a seat on Redback's board of directors, said it would execute a number of joint technology cooperation initiatives in the next few months, including linkages of products in the DSL and wireline intelligent edge market.

"Redback Networks and Nokia's Broadband Systems Divisions' sales forces and channels will closely cooperate to target leading carriers and service providers," according to a statement.

Redback, which was forced to implement layoffs and cancel product launches to offset widening losses, was enthusiastic about the Nokia alignment. ""We are pleased to expand the scope of our relationship with Nokia at a time when new revenue generating services are crucial to the service provider business model," said Redback CEO Kevin DeNuccio.

"Nokia's expertise in wireless IP networks and broadband access coupled with Redback's leading subscriber management and edge routing technology will enable faster delivery of services at the edge of the network," he added.

Investors, too, reacted positively to the news, sending Redback shares up almost 18 percent in early going Wednesday. Redback stock was trading at $2.67, up from the $2.27 opening price.