Redback out at Verizon?

* Report says Redback not likely to win edge router contract at Verizon

UBS Warburg has downgraded the stock of Redback Networks, citing "industry contacts" indicating that Redback has lost an edge router deal at Verizon.

UBS lowered the stock from Buy 2 to Neutral 2, according to a research report issued last week by the investment firm.

That report states that Redback is unlikely to win an edge router contract at Verizon even though the vendor has "the best technical solution." The business will instead go to Cisco as the second source supplier behind Juniper, the report states.

UBS says product portfolio breadth helped seal the deal for Juniper and Cisco.

"We believe both Juniper and Cisco offered aggressive pricing for the edge business, leveraging other parts of their portfolio - core routers, enterprise routers, and services," the report, written by Analyst Niko Theodosopoulos, states.

UBS initially estimated the total annual revenue opportunity of the RFP at $125 million, but the firm now believes it could be half that.

Redback did not immediately respond to an e-mail request for comment. But the company did announce later in the week that it had won edge router business in 22 of China's 32 provinces, and that its SmartEdge edge routers have been selected by a Thai carrier as the platform for a next generation broadband IP infrastructure.

Redback also has significant installations at AT&T and BellSouth, but the impending merger of these two carriers could create some disruption risk for Redback, analysts say.


Copyright © 2006 IDG Communications, Inc.

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