Nokia Corp. Wednesday announced a definitive agreement to acquire edge router maker Amber Networks Inc. for US$421 million in stock.
Amber, headquartered in Fremont, California, is a privately held company founded in 1998 and employing 223 people. Amber will be absorbed into the Network Platforms business of Nokia.
"Our target is to shape future mobile network architectures, and this acquisition is a logical step in our strategy. Nokia is acquiring Amber Networks for its ability to develop fault-tolerant edge routers," said Dr. J.T. Bergqvist, senior vice president of Nokia Networks, in statement.
The Amber acquisition enhances Nokia's technology at the edge of future data-oriented mobile networks by adding more IP intelligence, the company says. Amber's ASR2000 router performs multiservice aggregation for a Multiprotocol Label Switching core network.
Nokia is developing a new carrier-grade routing platform for the edge called FlexiGateway, the company says. Amber Networks technology will add fault-tolerant routing to FlexiGateway.
"It's a surprise because of Nokia's lack of any interest or moves in the router space before," says Kevin Mitchell, directing analyst for service provider networks at Infonetics Research in Woburn, Massachusetts. "I think it's going to be a piece of a bigger puzzle. I don't think just buying the company and stopping makes sense. They have to compile a broader routing portfolio."
Nokia did buy IP switching company Ipsilon in late 1996 but it's not clear if Nokia did anything with that technology. IP switching initially routed packets but then performed cut-through routing, or switching, on flows with the same destination IP address.
Currently, Nokia relies on Cisco for core network routers in turnkey solutions. Analysts anticipate this relationship will continue unchanged.
As for edge routing, it now appears that this acquisition could limit the expansion of Cisco's opportunity within Nokia, according to investment firm UBS Warburg.
Mitchell says he's encouraged that companies seem to be in acquisition mode again after the acquisition frenzy of 1999 and 2000 was capped with this year's telecom depression. The downside of this particular acquisition, however, is that Amber has few if any customers, he says.
"I'm quite sure they were making little if anything in terms of revenues," Mitchell says. "Amber has no established customer base and it's uncertain how far along they were in terms of actual development."
Amber currently does not have revenue-generating customers but has lab trials with approximately 15 wireline customers and small CLEC carriers. Product trials are running at Qwest and Time Warner.
The acquisition is expected to close in August.