Redback Networks

Redback Networks was a United States telecommunications-equipment company focused on the infrastructure used by Internet service providers to deliver and manage broadband services. Rather than operating a consumer-facing access network, the company developed hardware and software that helped service providers authenticate subscribers, control sessions, provision services, manage traffic, and support large-scale broadband deployments. The company was founded in August 1996 by Gaurav Garg, Asher Waldfogel, and William M. Salkewicz. Its early financing included seed investment from Sequoia Capital. Redback emerged during the rapid expansion of Internet access and telecommunications infrastructure in the late 1990s, when service providers were moving from narrowband dial-up systems toward cable, DSL, and other forms of broadband access. This market created demand for specialized subscriber-management and edge-network equipment capable of handling growing customer volumes and differentiated service plans. Redback became a public company in May 1999 through an initial public offering. Its shares reportedly priced at $23 per share and rose sharply on the first day of trading, reflecting the intense investor enthusiasm surrounding networking and Internet businesses during the dot-com period. The company subsequently pursued acquisitions to broaden its technology portfolio. In November 1999, it acquired Siara Systems in an all-stock transaction reported at approximately $4.3 billion. Siara’s products were still at the prototype stage at the time of the transaction. Redback also acquired Abatis Systems in August 2000. The company’s principal product families included the Subscriber Management System, commonly known as SMS, the SmartEdge platform, and the SmartMetro line. These products addressed different elements of broadband-service delivery, including subscriber control, carrier-grade edge routing and aggregation, and metropolitan network connectivity. Their customers were primarily telecommunications carriers, cable operators, and other Internet service providers rather than individual consumers. Redback’s market value was heavily affected by the collapse of the dot-com and telecommunications investment cycle. Its share price reached a reported peak of $198 in 2000 but later fell to $0.27 in October 2002 after the technology-market bubble burst. During this broader period of industry restructuring, the company continued operating as a supplier of broadband access and service-management technology. It opened a regional headquarters in Hong Kong in October 2000, reflecting its efforts to support business in Asian and other international markets. In January 2007, Ericsson acquired Redback Networks for approximately $1.9 billion, or $25 per share. The acquisition ended Redback’s independent existence and brought its broadband-access and service-edge capabilities into Ericsson’s carrier networking portfolio. Redback Networks is therefore best understood as a former communications-technology company and acquired enterprise brand, not as an active standalone operator or consumer telecommunications brand.

Redback Networks was established in August 1996 by Gaurav Garg, Asher Waldfogel, and William M. Salkewicz. Sequoia Capital provided seed financing. The company entered the market as Internet access was shifting toward broadband, creating a need for equipment that could manage large numbers of subscribers and support the operational requirements of Internet service providers. Its technology centered on the service-provider edge of the network. Redback supplied systems that allowed carriers and other providers to manage subscriber sessions, apply service policies, aggregate access connections, and support broadband delivery. This placed the company in the business-to-business telecommunications-equipment sector rather than in consumer electronics or retail Internet access. In May 1999, Redback completed an initial public offering during the peak of the dot-com investment boom. Its shares were priced at $23 and reportedly increased 266 percent on their first trading day. The company then used acquisitions as a means of expanding its product and technology base. In November 1999, it acquired Siara Systems in an all-stock deal reported at approximately $4.3 billion. Siara’s products were described as being at the prototype stage when the acquisition took place. Redback acquired Abatis Systems in August 2000 as well. The company’s market capitalization was subsequently caught in the collapse of technology and telecommunications valuations. Its share price reached a reported high of $198 in 2000 before declining to $0.27 in October 2002 following the bursting of the dot-com bubble. This decline reflected the severe revaluation of networking companies during the sector downturn, although Redback continued to develop and sell infrastructure for broadband providers. Redback’s named product families included the Subscriber Management System, or SMS, SmartEdge, and SmartMetro. The SMS line was associated with subscriber and broadband-service management. SmartEdge addressed carrier-grade edge-network functions, while SmartMetro focused on metropolitan networking applications. Together, these lines positioned Redback as a supplier of platforms connecting access networks with the service-provider core and operational systems. Redback also developed an international footprint. In October 2000, it opened a regional headquarters in Hong Kong. This move reflected the importance of Asian telecommunications markets and the need to provide regional sales and support for carrier customers. Ericsson acquired Redback Networks in January 2007 for approximately $1.9 billion, or $25 per share. The transaction absorbed Redback’s technology and business into Ericsson and ended Redback’s independent corporate life. Because the company was acquired rather than continuing as a standalone brand, its historical importance lies primarily in the development of broadband subscriber-management and service-edge networking during the expansion of commercial broadband Internet access.

1. 2007Acquired by Ericsson

   Ericsson acquired Redback Networks in January 2007 for approximately $1.9 billion, or $25 per share.

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2. 2000Abatis Systems acquisition

   Redback acquired Abatis Systems in August 2000.

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3. 2000Hong Kong regional headquarters opens

   The company opened a regional headquarters in Hong Kong in October 2000.

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4. 1999Initial public offering

   Redback became a public company in May 1999, with shares priced at $23 and a reported 266 percent first-day increase.

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5. 1999Siara Systems acquisition

   Redback acquired Siara Systems in November 1999 in an all-stock transaction reported at approximately $4.3 billion.

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6. 1996Company founded

   Gaurav Garg, Asher Waldfogel, and William M. Salkewicz founded Redback Networks in August 1996, with seed financing from Sequoia Capital.

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A specialist provider of carrier-grade broadband access, subscriber-management, edge-routing, and metropolitan networking infrastructure for Internet service providers.

• Subscriber Management System (SMS)Broadband subscriber-management platform

  The Subscriber Management System was a Redback platform for Internet service providers managing broadband subscribers and access sessions. It supported the service-provider functions needed to control customer connectivity and apply network service policies at scale. The system represented Redback’s core focus on the operational and management layer of broadband access rather than on consumer-facing devices.

• SmartEdgeCarrier-grade edge networking

  SmartEdge was a Redback product family aimed at the edge of carrier and Internet service-provider networks. It was associated with broadband aggregation, routing, and service delivery between access connections and the provider’s core infrastructure. The platform helped position Redback as a supplier of large-scale, carrier-oriented equipment for providers moving beyond basic access connectivity.

• SmartMetroMetropolitan networking

  SmartMetro was Redback’s metropolitan-networking product line. It addressed connectivity and aggregation requirements within metropolitan service-provider networks, complementing the company’s subscriber-management and broadband-edge offerings. The line reflected the growing importance of metro transport and aggregation as broadband traffic increased and providers expanded their network capacity.

• 2007Acquisition by EricssonM&A

  Redback’s broadband-access and service-edge capabilities were relevant to Ericsson’s carrier-networking business.

  What changed. Ericsson acquired Redback Networks in January 2007 for approximately $1.9 billion, equivalent to $25 per share.

  Aftermath. Redback ceased to operate as an independent company and its technology was brought into Ericsson’s portfolio.

  Acquisition value. $1.9 billion, or $25 per share (January 2007)

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• 2000Acquire Abatis SystemsM&A

  Redback continued broadening its technology and product capabilities during the expansion of the networking-equipment market.

  What changed. The company acquired Abatis Systems in August 2000.

  Aftermath. The acquisition became part of Redback’s broader expansion before the telecommunications market downturn.

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• 1999Acquire Siara SystemsM&A

  Redback sought to expand its technology portfolio during the rapid growth of Internet and telecommunications infrastructure.

  What changed. It acquired Siara Systems in an all-stock transaction reported at approximately $4.3 billion, although Siara’s products were still at the prototype stage.

  Aftermath. The transaction became one of the company’s major expansion moves during the dot-com boom.

  Reported transaction value. $4.3 billion in stock (November 1999)

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• 2007Ericsson acquires Redback Networks

  Ericsson agreed to acquire Redback Networks in January 2007 for approximately $1.9 billion, equivalent to $25 per share. The transaction ended Redback’s status as an independent company.

  M&A
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• 2000Redback Networks acquires Abatis Systems

  Redback expanded its technology portfolio through the acquisition of Abatis Systems in August 2000.

  M&A
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• 2000Redback opens Hong Kong regional headquarters

  The company opened a regional headquarters in Hong Kong as part of its international presence and support for telecommunications customers in the region.

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• 1999Redback Networks completes initial public offering

  Redback became a publicly traded company in May 1999. Its shares were priced at $23 and reportedly rose 266 percent during the first trading day.

  Other
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• 1999Redback Networks acquires Siara Systems

  Redback acquired Siara Systems in an all-stock transaction reported at approximately $4.3 billion, even though Siara’s products were still in prototype form.

  M&A
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1. Redback Networks