Ericsson agreed to buy San Jose-based Redback Networks Inc. for $2.1 billion, accelerating competition with Cisco Systems Inc. in the market for Internet routers.
The price of $25 a share represents an 18% premium to Redback's Tuesday closing price of $21.17. Redback will retain its management team and operate as a unit of Stockholm-based Ericsson, which is the world's largest maker of wireless-network equipment.
Ericsson gains a maker of Internet routing equipment that is growing faster than Redback's larger rivals, Cisco and Juniper Networks Inc.
The deal comes less than three weeks after Paris-based Alcatel completed its takeover of Lucent Technologies Inc., creating the biggest maker of telecommunications gear.