ERIC’s IP Ambitions

11:18 AM -- Having shelled out $2.1 billion for IP equipment vendor Redback Networks Inc. , Swedish giant Ericsson AB (Nasdaq: ERIC) was hardly likely to leave it sitting in a corner, a peripheral part of its business. (See Ericsson Offers $2.1B for Redback .)

Now, a year after the acquisition closed, Ericsson has revealed its plan and its ambitions -- to turn Redback into the IP router sector’s No. 2 company. That’s going to be quite a challenge, bumping up Redback’s market share from about 3 percent to 4 percent to more than 20 percent. (See Redback Goes on the Offensive and Ericsson Finalizes Acquisition.)

The two vendors it’s looking to usurp are Alcatel-Lucent (NYSE: ALU) and Juniper Networks Inc. (NYSE: JNPR). One respected IP equipment executive has already expressed the opinion that Ericsson would be stretching itself too far if it tried to position itself as a key supplier of IP gear for mobile and fixed carriers, and that it would need to focus its development efforts on one or the other if it is to make a more meaningful impact on the market.

Well, it seems that much of Redback’s efforts are going to be in developing equipment for wireless networks, and pushing Redback’s gear hard into Ericsson’s enormous mobile operator customer base. However, the company is hardly going to push the fixed world to one side or ignore it, given it already has a reasonable installed base of fixed line operators, and one that appears to be growing.

Can it be cover all the bases? We’ll see -- AlcaLu appears to be pitching itself equally into the mobile and fixed world with its edge routers and not suffering as a result.

In the meantime, it’s worth remembering that Alcatel built itself from zero to hero in the IP equipment space in less than three years by acquiring TiMetra and developing its technology, so a precedent has been set. (See Alcatel Router Revenues Surge.)

— Ray Le Maistre, International News Editor, Light Reading

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