Redback (RBAK) Update

Good news out on RedBack (RBAK) this morning. The company is partnering with HP.

I don´t pretend for a second to fully understand the product that results from this partnership. The "big picture" take though, (and that´s all that really matters, by the way, for investing) is that the combined product is beneficial for carriers´ broadband deployments.

From Redback´s (RBAK) PR Machine: "In order to take full advantage of advanced IP services, carriers will require integration of best-of-breed products with the OSS environment to enable customers to more effectively operate and deploy services in their networks," said Paul Hughes, director of billing & payment applications at Yankee Group. "With the integrated Redback and HP solution, carriers can immediately deliver and manage MPLS VPN services, capitalizing on the potential revenue opportunity these in-demand services provide."

Now does that make it any clearer? If not, don´t worry. It´s all about Internet infrastructure. If all the recent hype surrounding consumer Internet plays (i.e. Google, Yahoo etc.) is accurate, then there will be huge investments in Internet infrastructure. Watch for Wall Street to start pushing Internet infrastructure plays soon.

Bottom-line: RBAK´s stock is up nicely since my recommendation. I´m holding out on this one, since revenue growth will be very good next year, and the company will begin showing profits vs. losses in 2006.

Post-Bankruptcy stocks in hot industries (or better yet previously hot industries), with rising revenues, and profits vs. losses, usually make for great stocks. The simple explanation is that these types of companies have a large supply/demand imbalance for their shares. The high demand comes from funds that will not invest until a company starts showing profits, to skeptical, formerly-burned investors, who will not invest until a recovery is proven. The low supply of stock is simply a function of a lack of long-term investors from the old hype, pre-bankruptcy days.