Redback Networks, Inc. (RBAK)

[PowerPole]

Sonus CEO says Redback sale good for industry:

Says proposed Ericsson purchase further legitimizes new technologies...

By Jeffry Bartash, MarketWatch
Last Update: 4:53 PM ET Dec 20, 2006

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WASHINGTON (MarketWatch) - Sonus Networks Chief Executive Hassan Ahmed said Wednesday that Ericsson LM's proposed $2.1 billion acquisition of Redback Networks Inc. could accelerate the migration toward "next-generation" network technology and lead to all kinds of new services for consumers in a few years.

The decision to purchase Redback (RBAK), Ahmed said, indicates that Ericsson and other traditional equipment vendors are finally realizing the potential of the new technologies.

"Incumbent suppliers are waking up and moving the ball forward to build the broadband architecture of the future," the Sonus (SONS) CEO said in an interview with MarketWatch.

For decades, Ericsson (ERIC) has been a leading provider of circuit-switched or "legacy" equipment used in networks of large communications companies. Yet carriers are increasingly removing older gear and substituting new Internet-based technologies.

Internet-based technologies are cheaper to operate in the long run and better suited to enable phone or cable companies to offer the so-called triple play - voice, video and high-speed Internet service. In the U.S. and other developed nations, the race is on to see who can deliver all the services a customers needs, all on one bill.

The problem with older technologies, Ahmed said, is that they limit the choices of where and when a customer can receive a service. "There's only one way to watch your cable channel - on your TV," he said.

Newer network technologies, some of which are known as IP multimedia subsystems, would allow carriers newfound flexibility to tailor their services to the needs of each individual customer, he said. Any device connected to a network could receive virtually any service.

For example, customers could watch TV on their mobile phone or computer, or receive text or wireless messages on their television.

"IMS knows who you are and what services you can have," Ahmed said.

Sonus, based in Chelmsford, Mass., develops equipment that helps carriers to deliver Internet-based phone service. San Jose, Calif.-based Redback makes products that help network operators to deliver television and other services over the Internet. The companies are not direct competitors.

Like Redback, Sonus has developed a good reputation for its technology and products and has struck deals with four of the world's five largest network operators, Ahmed said. He estimate that about 20% of the world's Internet-telephone traffic crosses over technology supplied by Sonus.

Asked if Sonus has been approached by potential suitors, Ahmed declined to comment. He said the company is working every day to improve its products and believes Sonus could be a long-term competitor in the industry.

Competitors of Sonus include the much-larger Nortel Networks Inc. (NT) and Alcatel-Lucent (ALU), the recently combined French-American entity. One reason Alcatel sought to acquire Lucent was to gain access to its promising IMS-related technologies.

Jeffry Bartash is a reporter for MarketWatch in Washington.