Redback, Other DSL Stocks See Surge

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Those lucky enough to get in on the ground floor of Redback
Networks Inc., a Sunnyvale, Calif.-based provider of high-speed Internet equipment, were
greatly rewarded as the company's stock price rose more than fourfold from its
initial-public-offering price last week.

Redback -- which provides equipment for both
digital-subscriber-line and cable-modem-based Internet services -- went off at $23 per
share and quickly rode the wave of Internet frenzy, closing at $84.13 May 18, its first
day of trading. The stock closed at $90.50, up $6.38, May 19.

Redback's phenomenal success could be due in part to
the low number of shares offered -- only 2.5 million -- and the extremely hot Internet
sector.

But it could also indicate that investors are becoming
skittish concerning cable-modem services, which have been criticized of late for poor
service and sluggish deployment.

"People seem to like this [DSL] sector," Janco
Partners telecommunications analyst Tom Friedberg said. "There are still some
questions about cable-modem deployment. People see that DSL is going to be a clear and
faster alternative for high-speed Internet access."

Friedberg pointed to other recent IPOs in the DSL sector --
for Rhythms NetConnections Inc., Copper Mountain Networks Inc. and Covad Communications
Group Inc.

Rhythms NetConnections, a DSL company that went public at
$21 per share April 7, reached as high as $100 soon after its IPO, closing at $68.75 May
19.

Copper Mountain went public May 13 at $21 per share and
closed May 19 at $73.75.

Covad, which went public in January at $18, more than
tripled to $61.25 per share May 19.

Another DSL provider -- CAIS Internet Inc., which targets
hotels -- was set to go public May 20 after raising its offering price from $16 per share
to $19. "DSL is hot," Friedberg said.

However, Friedberg did not believe Redback's success
and the recent surge in IPOs for other DSL-based technology companies would spell trouble
for cable-modem stocks.

He added that although companies like At Home Corp., the
Redwood City, Calif.-based parent of @Home Network, have experienced difficulties in a few
markets, cable-modem service is far from dead.

"@Home has a huge advantage because they are working
with the cable companies," Friedberg said. "The DSL people have a continuing
relationship with the telcos. The only reason why companies like Covad, Rhythms and
NorthPoint [Communications] have a business plan is because the telcos are responding to
the cable companies."

But DSL, once laughed off as less than a serious
competitive threat by many cable companies, appears to be gaining ground.

"DSL seems to offer higher security, and it is
beginning to be widely available, like @Home and Road Runner," Friedberg said.
"And you have guaranteed access [with DSL] -- that's an attractive option for a
lot of folks."

Although DSL deployment is far behind cable-modem
deployment -- @Home alone has more than 460,000 customers in North America -- recent moves
by telephone companies like U S West, SBC Communications Inc. and Bell Atlantic Corp. are
beginning to show some promise.

SBC unveiled a plan earlier this year to roll out DSL to
8.2 million residential and 1.3 million business customers by the end of the year.

In addition, SBC and Bell Atlantic reached agreements with
America Online Inc. to offer DSL service to AOL members at a comparable price to
cable-modem service -- around $40 per month -- which should also increase the
service's availability.

Still, Friedberg added, while DSL is beginning to gain
ground at least in the eyes of investors, there is plenty of room for both cable-modem and
DSL service in the growing high-speed Internet market.

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