Cisco, Ericsson Join Forces

Cisco Systems Inc. (Nasdaq: CSCO) has teamed up with LM Ericsson (Nasdaq: ERICY) in a partnership aimed at incumbent carriers, chasing the Class 4 and Class 5 replacement markets and broadband services.

Rather than develop new products, the companies will work as systems integrators, each providing pieces of a single offering to carriers. Ericsson will be responsible for the actual integration work, and both companies will handle testing. It's not a reseller agreement and therefore won't tread on Ericsson's partnership with Juniper Networks Inc. (Nasdaq: JNPR), officials say.

On the Class 4/5 side, Cisco's GRS 12000 core router is being matched with Engine, Ericsson's softswitch. For DSL, the companies are linking Cisco's broadband remote services aggregation play, the 10000 line, to Ericsson's DSLAM and software.

In terms of each partner's market strengths, the work makes for a nicely interlocking picture. "Cisco brings in a connection with the Internet types of players, while we are bringing in the traditional [telecom] players," says Johan Bergendahl, Ericsson vice president of marketing.

Two carriers -- Telefònica SA and Telstra Corp. -- have already shown interest in both sets of products and helped initiate the Cisco-Ericsson partnership, says Tony Bates, vice president and general manager of Cisco's Routing Technology Group.

The companies say they could start shipping tandem products any time, but it appears likely that shipments won't start until late 2004 at the earliest. Ericsson will work on the integration during the summer, possibly revising some products to tailor them for the job, according to Bergendahl. "Through this year, we definitely expect to get orders placed for these," he says.

The companies aren't giving any revenue predictions for the partnership.

Cisco has its own softswitches such as the BTS 10200 and PGW 2200, but they've mostly served non-telco carriers such as cable multiservice operators (MSOs). As often happens, it's a case where Cisco's products suit newly built networks more so than the telcos. "Cable does not have the legacy PSTN. They're doing new services" such as VOIP, Bates says.

The partnership lets Cisco plunge into the Class 4 and Class 5 replacement market, competing with more traditional telecom suppliers such as Lucent Technologies Inc. (NYSE: LU) and Nortel Networks Ltd. (NYSE/Toronto: NT). Also in the mix are smaller firms including MetaSwitch, Sentito Networks, Sonus Networks Inc. (Nasdaq: SONSE), Telica Inc., and, through its acquisition of Gluon Networks, Zhone Technologies Inc. (Nasdaq: ZHNE) (see Zhone Regroups With Gluon.)

In 2002, Cisco's lack of cachet with telcos led to speculation that it might acquire Sonus to target Class 5 replacement. Still reeling from the downturn, Cisco chose instead to back away from that market (see Cisco Eyeing Sonus and Cisco Chills on Acquisitions). Since then, Cisco's only push into this market has been a partnership with Italtel SpA to handle Class 4 replacement for Telecom Italia SpA (NYSE: TI).

"Cisco is not known, obviously, as a voice player," says Erin Dunne, an analyst with Vertical Systems Group. "Ericsson [is a voice player], but they needed the back-end data capability."

So what about Juniper? Ericsson has a deal to resell Juniper's core routers, but there's no getting around Cisco's dominant market share. Carriers including BT Group plc (NYSE: BTY; London: BTA) and France Telecom SA (NYSE: FTE) sent "strong signals that they want us to get into a closer relationship to ship our products with Cisco," Bergendahl says. "We don't have any reason to complain about Juniper, and we're going to continue that relationship."

The broadband half of the project smacks of Ericsson's partnership with Copper Mountain Networks Inc. (Nasdaq: CMTN), adding software to that company's B-RASs (see Ericsson Mines Copper Mountain). But the key here is Cisco's routing capability.

"Cisco is taking care of what you could call the 'second mile,' and we are doing the first mile," Bergendahl says. Ericsson has a similar alliance with Extreme Networks Inc. (Nasdaq: EXTR), which will continue, he says.

The combined effort is probably a play against DSLAM giant Alcatel SA (NYSE: ALA; Paris: CGEP:PA), Dunne notes. With the Cisco 10000, Ericsson gains a portal linking its DSLAMs with the converged IP/MPLS network.

The unified front might help Cisco and Ericsson get into certain accounts. "Some of the service providers like to keep a single-vendor solution," Dunne says.

The combination is key because Alcatel already has a one-two punch. With its Newbridge Networks and TiMetra Networks acquisitions, Alcatel has a variety of Layers 2 and 3 switches it can place behind its DSLAM, Dunne notes.

— Craig Matsumoto, Senior Editor, Light Reading

inauniversefarfaraway 12/5/2012 | 1:54:35 AM
re: Cisco, Ericsson Join Forces Cisco will likely destroy the competition when IP phones become mainstream. Instead of the ssslllooowww dial and connect times, users will get virtually instant connectivity a single packet does the entire call setup function. Speeddial was never this fast. Users will be able to have more convenience at their ends, without having to pay, or to wait for the telco to provide clunky services that are expensive and often don't do the job. The phones will be able to figure out if there is someone near a phone, or if the call needs to be directed via the cellphone, or on the laptop. Not only will we be able to forget about figuring out which port is the fax, but the incoming calls and devices will contain the intelligence to figure it all out for the user. You will no longer pick up a receptacle to hear the wirble of some [email protected]$*&@^!^*)(@ fax machine dialing your phone. The phone companies can delay the inevitable in a feeble attempt to keep the dinosaurs on life support. Once consumers and businesses start enjoying the benefits of IP phone technology, they will demand that level of convenience. TDM gear will be in the museum right next to the PDP-11. Remember that IP was intended for one purpose: survivability. Was the phone grid equally intended for robustness, or is it a frail creature?
mdwdm 12/5/2012 | 1:54:34 AM
re: Cisco, Ericsson Join Forces IP is indeed for one purpose: survivability.

But that does not mean cisco is garanteed to
survive for the long run. I don't think cisco's lifetime will be longer than POTS.
Mezo 12/5/2012 | 1:54:34 AM
re: Cisco, Ericsson Join Forces Well put Mr. Chambers...I see the commercials have drained your marketing budget and you've resorted to LR posts...just kidding...this was more like the rant of a newbie marketing puke...
technovc 12/5/2012 | 1:54:32 AM
re: Cisco, Ericsson Join Forces hey its just not cisco out there. Try the snom phones , i have found them rock solid and more feature rich than the cisco and ofcourse cost effective too. website is www.snom.com
mcasaes 12/5/2012 | 1:54:30 AM
re: Cisco, Ericsson Join Forces How many TDM switches you saw being infected with a Worm ? and How many Call Managers ?
How many TDM switches being DoS ?
Don't take me wrong, I've a bunch of GrandStream phones, an Asterisk setup and connection to 3 VOIP providers, but can you imagine, as one example, all IP phones having to be upgraded because of the exploit of the week ?

TCP has been out there for some time...and...last few weeks have been quite interesting, correct ?
technovc 12/5/2012 | 1:53:41 AM
re: Cisco, Ericsson Join Forces I have tried the grandstreams as well , well it is what it is CHEAP !! tendency to loose registratioins without reason , instability and so on. Check out the snom 200 built on Linux and better suited for the internet and almost bulletproof to worms etc.
inauniversefarfaraway 12/5/2012 | 1:53:35 AM
re: Cisco, Ericsson Join Forces On the subject of growing pains, let us not forget how much legislation, and effort was needed to keep POTS working, and alive. We do not need to go over the fiasco that was those little grey boxes...
In spite of the "attack du jour", internet telephony will prove more resilient than the fragile infrastructure it replaces.
The current resistance to these innovations will only be embraced later as enabling more opportunity for service and revenu creation. Moreover, the modular nature of the services possible will allow competition. This is what is upsetting to established vendors.
The Cisco plug helped stir the pot, nothing more than interest at work here.
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