Fool.com: Redback Ponies up $4.3 Billion for Siara (Breakfast News) November 29, 1999

BREAKFAST WITH THE FOOL

Monday, November 29, 1999

"Let Wall Street have a nightmare and the whole country has to help get them back in bed again."
-- Will Rogers

Redback Ponies up $4.3 Billion for Siara

By Richard McCaffery (TMF Gibson)

News of the latest blockbuster alliance between Internet equipment manufacturers comes today from Redback Networks (Nasdaq: RBAK), which is acquiring privately held Siara Systems for $4.3 billion in stock.

Under terms of the deal, Redback will issue 31.3 million shares of stock for all outstanding shares, options, and warrants of Siara. The agreement is being structured as a merger, with Redback owning 62% of the new company and Siara owning 38%.

For the average investor, the trouble goes beyond figuring out how a company with $9.2 million in revenues last year could pay $4.3 billion for a start-up venture with really no sales to speak of. The first step is figuring out what these companies do.

Redback makes telecommunications hardware and software that allow companies to quickly provide high-speed access to the Internet and other networks. Its products manage large numbers of subscribers on a network regardless of the access technology being used.

Customers include telecommunications leaders such as MCI WorldCom (Nasdaq: WCOM), SBC Communications (NYSE: SBC), and BellSouth (NYSE: BLS). Redback went public six months ago and already has a market value of $5.9 billion. Competitors include market leader Cisco Systems (Nasdaq: CSCO).

Siara also makes telecommunications hardware and software. It develops platforms that improve scalability and speed up service delivery. Customers include fiber optic network company Qwest (Nasdaq: QWST).

Founded in 1998, Siara was part of renowned venture capital firm Kleiner Perkins Caufield & Byers' telecommunications portfolio, which included telecom hotshots Cerent Corp. and Juniper Networks (Nasdaq: JNPR).

Siara also has a team of 170 telecom executives and engineers, which will be folded into the new Redback. The deal is expected to greatly expand the size of Redback's addressable market, which should reach $15 billion next year.

News to Go

Rupert Murdoch's media and communications company News Corp. (NYSE: NWS) is close to investing $1.2 billion for a 10% stake in the Internet-based healthcare facilitator Healtheon/WebMD (Nasdaq: HLTH), Bloomberg reported. News Corp.'s media and distribution empire will be used to help promote the services Healtheon provides.

Semiconductor manufacturer Advanced Micro Devices (NYSE: AMD) today released the latest version of its Athlon processor, believed to be the industry's fastest and most powerful x86 chip. The 750 MHz Athlon was built using the company's aluminum 0.18-micron manufacturing process.

The long-awaited film "Toy Story 2," the collaborative effort between entertainment giant Walt Disney (NYSE: DIS) and digital animation studio Pixar (Nasdaq: PIXR), didn't disappoint at the box office this weekend. The film crushed the Thanksgiving weekend box office record by raking in $80.8 million since its release last Wednesday.

Crude oil, natural gas, and petroleum companies Mobil (NYSE: MOB) and Exxon (NYSE: XON) may receive U.S. regulatory approval for their $86 billion merger as early as this week, Bloomberg reported. Both companies have divested more than 2,000 gas stations and other assets to help earn approval for the deal.

More Foolishness

Don't guess, find out if your 401(k) is Foolish... A special look at the most influential people of the 20th century... A quick scan of the Foolish message boards for the best posts of the week.