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Optical/IP Networks

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

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