Ericsson and Redback Networks Inc. have announced that they have signed a definitive agreement under which Ericsson will acquire Redback for USD 25.00 per share, or an aggregate price of approximately USD 1.9 billion. The offer represents a premium of 60 percent to Redback's [90-day] volume weighted average stock price.

• Ericsson offers USD 25.00 per share in cash
• A total consideration of USD 1.9 b. after deduction of net cash
• Cash transaction to be internally funded
• Redback brings leading IP edge technology, critical in IP networks
• Expands Ericsson's IP market presence and growth opportunities
• Expands Ericsson's leadership in next generation IP networks

Redback was founded 1996 in San Jose, CA, the heart of Silicon Valley and listed on NASDAQ in 1998. Redback has over 700 carrier customers in more than 80 countries and employs about 800 people, including 500 R&D engineers. Fifteen of the top 20 telephone carriers worldwide use Redback's technology, including broadband routers to manage IP-based data, voice and video services.

Redback has a strong position in multi-service edge routing technology, which helps carriers deliver broadband, telephone, TV and mobility services over internet-based infrastructures. The company grew sales 33 percent for full year 2005 and 87 percent for the first nine months of 2006 to USD 197 m.

Carl-Henric Svanberg, president and CEO, Ericsson, says: "The combined strengths of both companies will create significant value for customers and shareholders and exciting opportunities for employees. The pace of IP deployment is accelerating as operators move to all-IP converged networks, in which quality of service requires increasingly intelligent routers with higher capacity."

The ongoing and rapid build out of mobile and fixed broadband networks has led to the introduction of new IP-based services, such as VoIP, IPTV, and video-on-demand. These applications demand a very high quality of service and existing broadband networks lack the bandwidth and management tools to deliver these services in a reliable way.

Telecom grade performance is the essence of Ericsson's end-to-end offering, and with the growing importance of IP-based services it is key to have our own IP routing technology as a fundamental part of Ericsson's offering.

"The combination of Redback's intelligent routing technology and our leading IMS (IP Multimedia Subsystem), optical transport and broadband access puts Ericsson in a leading position with end-to-end IP solutions for both fixed and mobile operators," adds Svanberg.

We see numerous expansion opportunities upgrading networks in the future, leveraging Ericsson's ongoing R&D initiatives, broadband product portfolio and the well-established market presence of Redback's router technology and IP competence.

Svanberg concludes: "This transaction is consistent with our strategy of organic growth complemented with bolt-on acquisitions that speed our time to market and strengthen our competitive position. Redback brings leading IP routing technology, market presence and very competent R&D personnel that when added to Ericsson creates a very powerful and unique offering to our customers."

Kevin DeNuccio, president and CEO, Redback, says: "This agreement is about accelerating market growth, integrating IP routing and mobility expertise and shaping the future of next generation networks. Video changes everything about networks today. Redback is the acknowledged technology leader delivering broadband, phone, video and mobility services over internet-based infrastructures."

Upon completion of this transaction, Redback will become a wholly owned subsidiary of Ericsson, and will become a cornerstone of Ericsson's IP routing platforms and solutions. Ericsson intends to maintain Redback's offices and facilities in San Jose, CA and elsewhere.

Ericsson continues to increase its investments in next generation networks. The acquisition offers time and cost synergies and is expected to be accretive from 2008, excluding possible non-cash charges relating to amortization associated with acquired intangibles. The transaction will be slightly dilutive in 2007 mainly due to one-time costs associated with the transaction.

The acquisition will be conducted by means of a tender offer for all of the outstanding shares of Redback. The board of directors of Redback has unanimously recommended that the shareholders of Redback accept the offer. Completion of the transaction is subject to acceptance by shareholders and regulatory approvals and is expected before the end of February 2007.

The offer, which is expected to commence within the next week, will be subject to customary conditions, including anti-trust and other regulatory clearances and the acquisition by Ericsson of a majority of Redback's shares.

Holders of approximately 22 percent of the outstanding shares of Redback have agreed to tender their shares in the offer and to vote their shares in favor of the merger agreement and against any other transaction, subject to the provisions of the agreement.

Citigroup and SEB Enskilda are acting as Ericsson's financial advisors in the transaction.

Live webcasts of the press conference and conference call as well as supporting slides will be available at www.ericsson.com/press and www.ericsson.com/investors.