Ericsson has announced that they will be buying leading edge router manufacturer Redback Networks Inc (NASDAQ: RBAK). The announced price of the deal is US $2.1 Billion or $25 per Redback share. The acquisition will occur through a tender offer for all of the outstanding shares of Redback common stock.

Redback Networks Inc will maintain their independent management team and operate as a wholly-owned subsidiary. The deal is expected to expand Ericsson’s operations and accelerate product development in order to meet growing customer demands for next generation broadband networks.

The deal will give Redback Networks a large advantage over their primary rival router maker, Juniper Networks. For one, Redback Networks will have far more financial resources. In addition, Ericsson’s current deal to resell routers produced by Juniper will most likely not be renewed. Other holes in the relationship between Juniper and Ericsson are expected to also rise. Ericsson and Juniper formed a joint venture in 2000 known as Ericsson Juniper Networks Mobile IP. 60 percent of the venture, which provides mobile Internet routing products to wireless network operators building GPRS and 3G networks, is owned by Ericsson.

Redback president and CEO, Kevin DeNuccio, stated to the AP: "We believe Redback now will have the global reach and financial resources to accelerate its own routing technology innovation and grow market share faster than our traditional routing competitors."

Ericsson CEO, Carl-Henric Svanberg, said "Redback has always had a well-known technology advantage over its larger routing competitors in broadband services edge routing. We believe the combined strengths of both companies in mobility and IP routing will create significant value for customers and shareholders."