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More on why Wall St. likes this deal...
Redback Networks to Buy Siara Systems for $4.27 Bln
Sunnyvale, California, Nov. 29 (Bloomberg) -- Redback Networks Inc., a networking-equipment maker that went public six months ago, agreed to buy Siara Systems for about $4.27 billion in stock to expand its products that speed Internet traffic.
The company will issue 31.3 million shares for closely held software maker Siara, which has no products for sale and no revenue. Redback had sales of $9.21 million last year and $20.6 million in this year's third quarter. Its shares, which have surged 11-fold since its initial public offering, rose 5 5/8 to 142 1/8 at midday, giving it a market value of $6.18 billion.
Redback's devices make it easier for regional phone companies and cable providers to offer high-speed Internet services. Siara is developing a system to manage Internet traffic to make it faster and more secure. That will help Redback compete against larger rivals such as Nortel Networks Corp.
``This extends the product line to meet the network needs of its current customers and helps it attract future customers,' said analyst Paul Johnson of Robertson Stephens in New York. He rates Redback a ``buy.'
Sunnyvale, California-based Redback's customers include Qwest Communications International Inc., SBC Communications Inc., GTE Corp. and Bell Atlantic Corp.
Siara, based in Mountain View, California, expects to start testing its system in the next few months, Johnson said.
Adding Expertise
With the purchase, Redback gets semiconductor engineers who helped develop Advanced Micro Devices Inc.'s K6/K7 microprocessors and engineers from ADC Telecommunications Inc., Lucent Technologies Inc. and Cisco Systems Inc.
Siara was formed in June 1998 with money from venture capitalists Kleiner Perkins Caufield & Byers. ADC Telecommunications invested $3.5 million in the company and loaned it $9.5 million in May.
Redback shareholders will own 62 percent of the new company and Siara holders will own 38 percent. The purchase will add more than 170 engineers to Redback. Siara's product development team will keep its current structure, and no firings are expected.
Nov/29/1999 11:51
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(C) Copyright 1999 Bloomberg L.P.
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