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.