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Redback Shares Rock: What's Up?

Redback Networks Inc.’s (Nasdaq: RBAK) shares rose 10 percent today, on no public news. But sources close to the company say it’s winning a nice share of European business, with a potentially large PTT contract for its SmartEdge product on the way.

Once source says to expect a new European PTT customer for Redback’s SmartEdge product soon. One potential SmartEdge customer, based on Redback's past SMS business, is Sweden’s Tele2 AB (Nasdaq: TLTO). But Tele2 is an alternative carrier, not an incumbent. Of the major European PTTs, Redback’s already got deals with Deutsche Telekom AG (NYSE: DT) and for the SmartEdge. One potential PTT customer for SmartEdge could be , which was an SMS customer but has not yet been announced as a SmartEdge customer.

Redback officials won't disclose its future contract announcements. However, last week at The Future of Telecom – Europe 2005 the firm said it expects to announce new customers shortly (see FOTE: VOIP, Video & Carlsberg). Redback’s director of marketing, Young-Sae Song, pointed to his company's success in BT's 21CN project -- reported exclusively by Light Reading -- as well as to contracts with other big providers such as and (see Alcatel Names Its 21CN Partners and Redback's SmartEdge Perks Up ). He said to expect more announcements shortly.

Analysts say Redback's back on the right track after it spent years developing and repositioning its edge routing product, SmartEdge. The timing couldn't be more fortuitous, as major carriers are now investing in new broadband deployments that support advanced services like IPTV.

"The SmartEdge is definitely getting some traction in next-generation broadband buildouts," said Rick Thompson, senior analyst with Heavy Reading.

No doubt, Redback's business is doing well. BT, SBC Communications Inc. (NYSE: SBC), and KT Corp. each accounted for 10 percent of Redback's revenues during its most recent quarter.

There are also rumors that one of Redback's top distributors is eyeing the company for acquisition. Redback's top resellers by revenue are Alcatel (NYSE: ALA; Paris: CGEP:PA), Nokia Corp. (NYSE: NOK), and Telindus Group NV (Euronext: Tel.BR), which, interestingly, all have significant European customers.

Wall Street seems to think that something big is coming. More than 4.4 million Redback shares have changed hands today, and the company's average share volume is around 800,000.

Redback shares closed up $0.99 (9.86%) to $11.03.

— R. Scott Raynovich, US Editor, Light Reading

OSXman 12/5/2012 | 3:01:48 AM
re: Redback Shares Rock: What's Up? Creedon Keller, an investment fund, owns about 16% OF Redback. Recently, they announced that they would be shutting their fund and returning the capital to investors, with the exception of the Redback position. I don't know what their plans are, but I must assume that they would like to sell the Redback position and they would like to maximize the value of this position.

All I can say is that if I were Creedon Keller, and I owned 16% of the company, I would be trying to shop the company around to a strategic buyer who would pay me a premium for my whole position.

Redback has a hot product in a hot market, with a large backlog of business. I think it would make a terrific acquisition for any number of companies.

Laurel, a tertiary competitor, recently went for about 4x revenues. I suspect Redback will go for a lot higher than that.
longshort 12/5/2012 | 3:01:47 AM
re: Redback Shares Rock: What's Up? Agreed. RBAK is beginning to ramp up shipment of their SE to BLS,BT,KT, the list goes on. Companies like csco, jnpr, and even alcatel can use some of the growth to drive up their stock price. With bidding war, rbak could see 100% buyout premium. A $30-$40 per share buyout is very likely if the share trade up from here before the buyout.
lightreceding 12/5/2012 | 2:57:49 AM
re: Redback Shares Rock: What's Up? out soon. The guy who brought the SEC down on Qwest and is charged with Civil Fraud, after doing sweetheart deals with Redback and Cisco and others, and cost them tens of millions a month for defense. Joel is still hiding out at Redback where his buddy Kevin DeNuncio gave him a cushy VP job. He doesn't even have to come in to the office any more. Lives in a place outside of Seattle. Gets a cushy $250,000 pay check and a $500,000 loan for the new house. Must be nice.
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