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Cisco & Ericsson Forge Killer Partnership

Ray Le Maistre
11/9/2015

Cisco and Ericsson, two of the biggest suppliers of communications networking technology and services in the world, altered the dynamics of the industry Monday morning with the announcement of a global strategic business and technology partnership that includes joint 5G, IoT, SDN & NFV and cloud R&D collaboration in emerging markets and resale and licensing agreements.

The relationship, if it can be managed successfully, should be a magnet for network operators worldwide, help secure the future of the two companies in the next-generation networking technology sector and, at the same time, give some of their rivals the cold sweats.

The partnership between the router and wireless giants, which will range from devices and sensors to core networks and data centers and include a broad range of professional services, will focus on:

  • The creation of an "end-to-end product and services portfolio, and joint innovation that accelerates new business models";
  • The development of "a highly secure technology architecture for seamless indoor/outdoor [wireless] networks";
  • R&D that will "accelerate the platforms and services needed to digitize countries and create the Internet of Things."


Learn more about strategies for keeping networks and customer data secure at our upcoming Carrier Network Security Strategies event in New York on December 2.

Working in tandem, the two companies have considerable firepower. They both have a global presence, have 76,000 professional services staff between them and hold more than 56,000 patents. In their most recent full financial years, Cisco Systems Inc. (Nasdaq: CSCO) generated revenues of $49.2 billion (up 4%), while Ericsson AB (Nasdaq: ERIC) achieved revenues of 228 billion Swedish kronor ($26.2 billion at current exchange rates). (See Cisco SP Revenue Improves – Finally and Ericsson Feels US Capex Squeeze in Q4.)

Ericsson is the global leader in mobile network technology and has been investing time, money and people into the development of New IP capabilities in recent years. (See Ericsson Opens Up on OPNFV, Mirantis Secures OpenStack Kingpin Status With $100M Round, Intel Collaboration , SKT Adopts Ericsson's Telco Cloud Platform and CEO Chat With Ulf Ewaldsson, Ericsson.)

Cisco, meanwhile, is the global leader in IP network technology and is fast developing a next-generation portfolio that includes SDN- and NFV-enabled systems (that actually work, according to independent tests) as well as the more traditional data center, enterprise and service provider networking gear. (See Cisco NFVi Evaluation: The Full Picture, Tail-f, Cisco & What the Future Holds, Verizon, Cisco Launch Smarter WAN and Validating Cisco's Service Provider Virtualization & Cloud Portfolio.)

Key to both companies will be the development of cloud, SDN and NFV capabilities that meet the needs of a wide range of network operators in the coming year: To that end, the duo is creating "a joint initiative focused on SDN/NFV and network management and control." (See Vendor Selection Survey: New Criteria for the New IP Era.)

Both companies have also invested heavily in developing video-centric business units in recent years. (See Ericsson Buys Microsoft's IPTV Unit, Cisco Buys OTT Video Specialist 1 Mainstream and Cisco Seals NDS Deal.)

The new partners believe they can generate incremental revenues as soon as the 2016 calendar year and each generate $1 billion in additional revenues by 2018.

Competitive considerations
With the networks of the future needing first-class wireless, optical, virtualization, IT and video capabilities (amongst other things), the combined portfolios of Cisco and Ericsson creates and even greater competitive threat to its main rivals.

Huawei Technologies Co. Ltd. has a momentum, reach and portfolio that can withstand such a collaboration, though it might make it even harder for the Chinese vendor to break into the US market in the coming years (even if political pressures subside).

The combined Nokia Corp. (NYSE: NOK) and Alcatel-Lucent (NYSE: ALU) has many of the attributes that the new partners can offer and once the integration of AlcaLu into Nokia is complete it should be able to offer a more integrated and seamless proposition in many cases. (See AlcaLu Deal Makes Us 'More Complete' Than Ericsson, Says Nokia CTO and Nokia Makes €15.6B Bid for Alcatel-Lucent.)

The company that might be affected most from a competitive standpoint is Juniper Networks Inc. (NYSE: JNPR). While it has been performing better recently and has a great reputation amongst communications service providers -- according to a recent survey of 150 North American service providers carried out by Heavy Reading , Juniper is now the most trusted vendor when it comes to next-generation infrastructure and services -- its future as an independent, standalone company has been the focus of some speculation recently, with Ericsson identified as a potential suitor. Any designs the Swedish giant may have had with regards to Juniper now look dead and buried. (See M&A Speculation Swirls Around Juniper and Juniper's Revival Continues But Doubts Persist.)

Cisco and Ericsson are holding a conference call to discuss their partnership later on Monday, so look out for further details and insight into their game-changing collaboration.

In the meantime, Ericsson's investors are clearly not opposed to the relationship with Cisco: The Swedish vendor's share price increased by 1.2% to SEK 86.80 in Monday morning trading on the Stockholm exchange.

— Ray Le Maistre, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, Editor-in-Chief, Light Reading

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Ray@LR
[email protected]
11/9/2015 | 2:43:58 PM
Re: Impact on Juniper
we know the answer now -- the impact is 8.55% heading south.
iainmorris
iainmorris
11/9/2015 | 7:31:15 AM
Impact on Juniper
It will be very interesting to see what impact this has (if any) on Juniper's share price when the markets open. A takeover of Juniper by Ericsson has been viewed as a serious possibility within the industry and the chances of that happening seem a lot remoter following news of this tie-up.
Ray@LR
[email protected]
11/9/2015 | 6:41:37 AM
The Comms Dating Game
So now that Cisco and Ericsson are dating -- who else shold start a relationship?
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