LM Ericsson Telefon has topped Lucent Technologies’ $170 million offer for the assets of bankrupt router maker Riverstone Networks with an $178 million offer.
Ericsson has tabled a $178 million bid for Riverstone Networks.
In February, Riverstone signed a deal to sell its assets to Lucent, which resells its Ethernet routers as part of a strategic partnership. But under the US Bankruptcy Code, it had to conduct an auction and the Sweden-based company’s US subsidiary nipped in with its offer by the March 16, 2006 deadline.
Now Lucent and Ericsson will meet in a New York lawyer’s office for the final stage of the auction and both can up their bids by a minimum of $250,000 until one drops out.
Riverstone’s financial woes are a paradox as it comes at a time of healthy demand for Ethernet-based edge infrastructure as carriers look for routers to provide business and residential customers with a range of services such as internet access, virtual private networks (VPNs), IPTV and VoIP as part of IP multimedia subsystem (IMS)-based offerings.
In a market agog with speculation that consolidation among equipment suppliers will follow that of the big carriers in the US, Ericsson has even been mentioned as a possible bidder for high-end router marker Juniper Networks.
However, that company’s market value of $11 billion would certainly be a deterrent, and Ericsson’s $2.1 billion acquisition of Marconi Corporation in January shows a preference for acquiring technology inexpensively from financially ailing companies.
Riverstone’s core technology is virtual private LAN services (VPLS), a layer-2 VPN offering that runs over carrier’s multi-protocol label switching (MPLS) networks and enables them to offer the ability for enterprise customers to take a VPN service without the need for the carrier to run their routing tables, as is the case with layer-3 IP VPNs.
While some carriers prefer the latter to VPLS because it gives them the opportunity to add more value and thus charge more for the service, there are some enterprises, particularly the larger ones with their own network management teams, who are reluctant to have a third party accessing and running their routing infrastructure. As such, some telcos and network operators feel the need to have VPLS in their portfolio as an alternative offering to IP VPN.