Redback Boosted by TCV, Verizon Talk
Redback's stock was up $0.92 to $11.92 in midday trading today.
TCV, already a major shareholder in Redback, reported yesterday in an SEC filing that it has acquired 1,072,500 more shares at $11 apiece. The filing says the transactions came through in chunks, on Nov. 1-3. TCV partner John Drew, listed in the filing, is on Redback's board of directors.
The news is intriguing, given that TCV was a major player in Redback's 2003 Chapter 11 restructuring, investing $30 million for a large stake in the firm after its restructuring (see Redback's Ready to Rise Again and Redback Sees End to Red Ink).
TCV already appears to have made out nicely on the restructuring transaction -- which gave it an 11 percent stake in Redback's equity, now worth about $72 million at today's market capitalization. The fact that it's now "doubling down" on its investment is taken by some to be an especially positive sign.
"A large insider buying more stock like that is a loud and clear 'Buy' signal," says Herb Chen, principal at Chen Capital. "That's as loud and clear a message as you get in the stock market." Chen disloses that he's an owner of Redback shares.
Adding to the intrigue are rumblings from several sources that Redback's products are being considered at an RBOC -- possibly (NYSE: VZ), according to one source. Verizon has already announced (Nasdaq: CSCO) and (Nasdaq: JNPR) as router and subscriber-management system vendors, but the source says Redback products are being considered by the carrier for certain edge routing and B-RAS applications.
Verizon did not immediately return a call for comment.
So why would Verizon be considering yet another router and subscriber-management vendor? One theory says the carrier is unhappy with Juniper's E320, a recently introduced high-density router targeted at IPTV, and wants to enlist a backup supplier.
"I think they're looking for another vendor right now," says financial analyst Sanjiv Wadhwani of Miller Johnson Steichen Kinnard Inc. "Features that were delivered on the product didn't meet all the requirements that Verizon had."
A Juniper spokeswoman said the company doesn't comment on rumors; in fact, the company wouldn't confirm whether Verizon even uses the E320. The spokeswoman noted that Verizon has been a customer of other E-series routers since the signing of a "multiyear master purchase agreement" in 2003. (See Juniper Goes Public With Verizon.)
Redback has been playing up the video capabilities on its SmartEdge routing platform and SmartEdge Services Gateway B-RAS product, which some analysts say give it an edge. Redback's contract win at (NYSE: BLS) appears to confirm that it has a shot at winning big accounts against larger competitors such as Juniper. (See How Redback Won BellSouth.)
— R. Scott Raynovich, US Editor, Light Reading
— Craig Matsumoto, Senior Editor, Light Reading, contributed to this story.