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Shares of Redback Networks (RBAK) shot up 20% on Wednesday after the company had announced that Swedish telecom Ericsson (ERIC) offered $1.9 billion to purchase the company, in an attempt to bolster its IP telephony capabilities and compete with Cisco (CSCO) and Juniper (JNPR).

The purchase price carries a 60% premium to the 90-day weighted average stock price, and 18% premium to the December 19th close on the Nasdaq.

Analysts have suggested that the price is too expensive for Redback. It seems that even though Ericsson is trying to rebound from financial setbacks experienced during the dotcom bubble, the company is digging itself into trouble again.

Some analysts believe that Ericsson is getting caught up in a tech frenzy again by paying too much to compete with Cisco.

Redback executives like the offer, of course, and already have plans to use the funding to develop and bolster internet television technology.

RBAK vs. ERIC 1-yr chart:

Source: Ericsson Buys Redback for $1.9 Billion