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Redbacking Siara
Saturday, January 1, 2000

A merger with a total market value of $11.2 billion is a charged thunderbolt waiting to unleash itself on the telecommunications horizon and set the stage for new standards, new opportunities. When Redback Networks Inc. and Siara Systems, valued at over 4 billion, exchanged corporate vows, they morphed into a powerful entity that is poised to become the first equipment supplier focused on developing integrated solutions for the New Access Network.
With the addition of Siara’s product portfolio and network operations software, Redback plans to extend its service creation and management capabilities across the entire New Access Network, which is expected to be in excess of $15 billion market this year and grow rapidly thereafter. The company will also acquire a roster of seasoned executives and over 170 engineers, both of which will be key to maintaining leadership in this larger market.

The Products

Redback’s Subscriber Management System (SMS) facilitates the rapid and widespread deployment of Digital Subscriber Line (DSL). The company markets its products to carriers who provide wholesale data transport services and Network Service Providers (NSPs) wanting to enhance their data service offerings.

Redback Networks makes widescale deployment of DSL a reality by bridging the operational gap between telco-based DSL equipment in the Central Office (CO) and service provider backbone networks. With DSL, service provider networks have to scale their operations to support large user populations. Also, DSL drives the bandwidth requirement of service provider backbones to unprecedented levels. Instead of managing thousands of low-speed dial users, they now must accommodate thousands of high-speed dedicated users. Redback is the first company to address these subscriber issues with its SMS 1000.

Siara’s portfolio of next generation products and network operations software — optimized for both access and metropolitan networks — is designed to enable progressive service providers and carriers to deliver both traditional time division multiplexing (TDM) and IP-based services with carrier grade reliability, security, and scalability.

Adding to Siara’s financial muscle are a portfolio of technologies that include six critical ASICs, some with up to five million gates and near 80 billion instructions per second of combined processing performance. Siara has developed core expertise in carrier-grade IP software, and built one of the leading IP development teams in the industry. Managed by Ravi Chandra, a former lead IOS software manager at Cisco Systems, Siara’s IP development team members have already successfully implemented the major IP-based routing protocols used in the Internet today.

A Wager On Talent

Siara Systems develops multi-service platforms for next-generation access networks, core to edge. Its flagship technologies include patented processing hardware, routing and signaling software to achieve network scalability and real-time service customization. Siara’s products will be in field trials with customers only in early 2000, and will see revenue only a little before 2001. What made Redback Networks, already the leading supplier of subscriber and service management solutions for the broadband market, go digging for that mother lode in Siara?

Market analysts say that synergistically the two companies go deeper than their products. Dennis Barsema, CEO and President of Redback Networks, describes the plan to acquire Siara as bold, brash and beautiful. Barsema adds, “We expect the combination of Siara Systems and Redback to create a powerful supplier in the communications industry, focused on serving the next generation access and service creation requirements of carriers and service providers.” Redback is actually investing in Siara’s talent of 170 engineers and the promise that their ideas will be more market-worthy than those of their competitors. Both companies believe that together they are on the verge of being the New Access Network’s first quickfix with the best integrated solutions.

Vivek Raghavan, CEO and president of Siara adds, “We have a vision, a product architecture, a product schedule, and most importantly an outstanding and phenomenal world-class team. These are the key elements that we bring to the party.”

The Market

New Access Network, which is fueled in part by the massive growth of installed fiber in metropolitan areas, is expected to span all layers of transport and services from the edge of the optical core to global corporate networks to individual broadband subscribers.

With the addition of Siara’s expertise in optical, silicon and IP technologies — key building blocks for New Access equipment — and full suite of products, Redback Networks expects to be in a unique position to accelerate service providers’ and carriers’ plans for leveraging the New Access Network.

“In this very competitive market, retaining a customer base and increasing revenue are the key business issues service providers and carriers are facing,” says Vivek Raghavan. “Redback Networks has been extremely successful in developing and selling solutions that achieve those objectives for the broadband access market. Now, with the addition of Siara’s core technologies and products, Redback Networks expects to deliver next-generation of networking solutions our customers could leverage to define the transport and value-added services of the future.”

According to Afshin Mohebbi, Qwest chief operating officer and president, “Qwest is a leading edge broadband network provider and needs vendors that are highly responsive and intimately understand our technical and market requirements. With the prospect of a powerful Redback-Siara combination, we would have a single supplier we could work with to obtain next generation platforms for combining all types of access, from the core all the way to the subscriber, with creation and delivery of next generation broadband IP services. The ability to blend optical transport with the creation and delivery of services would enable Qwest to reduce the number of components in its network, while extracting significantly more revenue from the resulting services.”

One Step Ahead of Competition

Siara and Redback bring complementary skills to the merger. Redback brings an over 120 customer base, its existing robust business, strong sales force and strong technology especially in the area of subscriber Internet management software. Siara brings the product vision for the rest of the access network, core competency of silicon engineering, IP routing and optical networking. Together they plan to chase the fast growing next generation access market and become the market leader. They realized that by merging their talent they came up stronger than if they had gone individually, a synergistic relationship that helps them strategically field the competition and give customers the products and services they need.

Vivek feels the merger has accelerated customer relationships by a whole year, “We accelerate the knowledge of services and what is important to the customers in terms of value added services.”

Dividing the Spoils

Under the terms of the agreement, which was approved by each company’s board of directors, Redback will issue 31.3 million shares for all outstanding shares, options and warrants of Siara Systems.

Redback stockholders will own 62 percent of the new entity, and Siara stockholders will own 38 percent. The merged company will retain the name of Redback Networks, and global headquarters will remain in Northern California. The company will retain Siara’s Vancouver, B.C.-based software development facility as a second development center. Dennis Barsema will remain CEO of Redback, while Vivek Raghavan will become president and chief operating officer. Craig Gentner will continue as Redback’s CFO. Vinod Khosla, general partner at Kleiner Perkins Caufield and Byers, already a member of the Siara board will now join the Redback board.

Telecom and datacom platform space, have for long been starved for increased computer processing power. With the core strengths and technologies of Redback and Siara, a dramatic upswing in silicon and software performance is a strong possibility. The world is watching and waiting.

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