Redback's Ready to Rise Again

Company closes in on funding, gets ready to exit Chapter 11, and could be in talks to combine with ECI Telecom

December 17, 2003

3 Min Read
Redback's Ready to Rise Again

Redback Networks Inc. (Nasdaq: RBAK) appears to be on the cusp of some fund raising and maybe, just maybe, more M&A talks, Light Reading has learned.Fund Raising
Employees at Redback say the company's senior management has recently said that the company has received several term sheets through selling equity in the "New Redback."

And what's the New Redback? It's the Redback that expects to get confirmation of its bankruptcy plan on Friday at a scheduled court hearing in Phoenix. Once a judge confirms Redback's plan, the company expects to emerge from bankruptcy shortly thereafter.

On November 12, Redback obtained a debtor-in-possession revolving credit line from Abelco Finance LLC, for up to $25 million. But the company still needs some funding to run its business once the bankruptcy period is over.

For more on Redback's bankruptcy, see:

  • Redback Investors Flee Restructuring

  • Redback Gets $30M Credit

  • Redback Gets Support for Restructuring

  • Redback Goes Chapter 11

  • Redback Closes a Chapter

Meritech Capital Partners, a late-stage venture capital firm partly funded by Accel, an original Redback backer, is one of the companies interested in funding Redback, one source close to Redback says. Calls to Meritech were not returned on Wednesday afternoon.

M&A Rumors
Redback has talked to ECI Telecom Ltd. (Nasdaq/NM: ECIL) about the possibility of a merger, according to one source close to the situation.

Redback hasn't responded to a request for comment, and neither has ECI, officially. But a source close to ECI, while not commenting on the rumor itself, did wistfully muse that Redback's access market share is enviable and that there is very little overlap between the two companies' product lines.

In the metro network, Redback has an edge router and ECI has a line of crossconnects, and a line of Sonet/SDH transport products, as well as a competitive multiservice provisioning platform.

Table 1: Next Gen Sonet/SDH Scorecard

Vendor

Access CLE

MSPP

MSTP

MSSP

Core STS1/VC4 Switch

Product Breadth (1-5)

ECI Telecom

Broadgate �LAN, �SAN

XDM 400, XDM 500

XDM 1000

T::DAX

n/a

4



In the access network, Redback has subscriber management platforms and B-RAS products that ECI lacks. In fact, with its SMS 10000 and SmartEdge 800 products together, Redback Networks has probably shipped more B-RAS systems than any other vendor, even though it rarely gets credit for being as ahead of the curve in that area.

Table 2: B-RAS Market Perception Results

Vendor

Recognition

Price

Performance

Quality and Reliability

Service and Support

(number of responses)

85

52

58

56

53

Redback Networks Inc.

43.50%

13.50%

8.60%

7.10%

7.50%



ECI has a line of central office and remote DSLAMs, as well as voice gateways and other bits of access network gear that Redback's gear often has to sit next to inside telecom networks.

ECI brought in $646.2 million in revenues last year and carries a market cap of $645 million. Redback's 2002 revenues were $126 million and its market cap is about $53 million.

Redback sources say management hasn't spoken of any talks with ECI or other merger possibilities. So far, Light Reading hasn't been able to confirm the talks with any other sources.

This wouldn't be the first time Redback has put itself up for sale. Nearly three years ago, the company was in talks to merge with Juniper Networks Inc. (Nasdaq: JNPR), but both eventually walked away (see Redback and Juniper Talked, Balked).

— Phil Harvey, Senior Editor, Light Reading

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