Outbidding Lucent ( LU), Ericsson ( ERICY) pledged $178 million for Riverstone's data networking business.
The move by Ericsson comes as rumors circulated earlier this week that the Stockholm wireless giant was interested in buying Juniper ( JNPR) in order to secure a big position in the Internet routing arena. Riverstone, which is in Chapter 11 protection, started soliciting bids for its networking assets after Lucent made a $170 million offer last month. Riverstone says Ericsson was the only bidder in the auction. Now a federal bankruptcy court judge will help determine the outcome of the sale starting next week. Ericsson's stronger bid is a blow to Lucent's plan to add more Ethernet gear to its broadband product offering. "This acquisition will enhance our ability to deliver large-scale Ethernet solutions," a Lucent executive said at the time of the original offer. A Lucent representative said the process is not over yet but declined to say whether the company would raise its offer. "We've made a fair offer, and we'll monitor the proceedings," says the rep. "We will carefully consider our options." Observers say the recent spate of phone company mergers has reduced the number of customers that equipment suppliers such as Lucent and arch-rival Nortel ( NT) can sell to. This is likely to squeeze the field of vendors and force some consolidation. Lucent shares rose a penny to $2.92, Nortel was down a penny at $2.93, and Ericsson was up 37 cents to $36.92 in early trading Friday.