Redback Networks

( RBAK) has agreed to be bought by telecommunications equipment supplier

Ericsson

(ERIC) - Get Report

for $2.1 billion, or $25 a Redback share, the companies said late Tuesday.

The acquisition, when complete, will boost Ericsson's plan to help telecommunications carriers lower costs and upgrade their networks, as well as "build leadership in the fast-growing broadband and IP services market," said Carl-Henric Svanberg, Ericsson's CEO.

Shares of the San Jose, Calif., networking-equipment maker soared more than 17%, or $3.63, to $24.80 after hours on the news. Ericsson rose 4 cents to $40.66.

The acquisition, expected to be completed in early 2007, is subject to customary closing conditions and regulatory approvals.

Redback will retain its management team and operate as a wholly owned subsidiary of Sweden-based Ericsson.

Earlier in December, Redback

won the second phase of a broadband network upgrade with Guangdong Telecom, the largest independently run provincial carrier of

China Telecom

(CHA) - Get Report

.