Nokia and Redback?

With tech stocks getting beaten to smithereens, why aren't there more buyouts? One reason is that the tech outfits that might be buying are fighting fires of their own. But the idea hasn't escaped them. "More takeovers should be happening fairly soon," says one investment banker, who has drawn up a list of likely targets. One of them: Redback Networks (RBAK), whose stock has fallen far--from 169 a share on Sept. 28, to 27 on Feb. 21. "The domino theory is in full swing and is driving the tech wreck," says this banker. The betting is that wireless phone leader Nokia will make a move, says one California money manager, who has been buying Redback shares. He says Cisco Systems and Juniper Networks, Cisco's rival in the Net core router market, are also eyeing Redback. But Nokia, he says, needs to get into routers badly.

Redback's flagship product, Subscriber Management System, lets Internet service providers, telecom carriers, and cable operators deliver high-speed Web access--quickly and cheaply. Nokia also supplies telecom infrastructure for both wireless and fixed-line networks. Acquiring Redback would give Nokia a smart router system. Recently, Williams Communications chose Redback's SmartEdge 800 optical networking platform for its nationwide fiber-optics networks. Other Redback customers include Qwest Communications, Cable & Wireless, and Genuity.

On fundamentals alone, Redback is worth 60, figures Lissa Bogaty of Credit Suisse First Boston. She sees Redback earning 44 cents cents a share in 2001 and 89 cents cents in 2002, up from 4 cents in 2000. Calls to Nokia and Redback weren't returned.

By Gene G. Marcial

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