Ericsson (NASDAQ:ERIC) and Cisco (NASDAQ:CSCO) say they have partnered to combine their strengths in routing, data center, networking, cloud, mobility, management and control, and global services to meet emerging network needs. The collaboration could lead to additional revenues of more than $1 billion each by 2018, the companies believe.
The partnership will target service providers, mobile enterprises, and the Internet of Things ecosystem, the companies say. The partnership includes a number of elements:
- joint development and the creation of reference architectures
- systems-based management and control initiatives, including joint work on software-defined networking and network functions virtualization (SDN/NFV)
- what the companies described as a "broad" reseller agreement
- a licensing agreement for their respective patent portfolios, which will see Ericsson receive license fees from Cisco.
"Initially the partnership will focus on service providers, then on opportunities for the enterprise segment and accelerating the scale and adoption of IoT services across industries," explained Hans Vestberg, president and CEO at Ericsson. "For Ericsson, this partnership also fortifies the IP strategy we have developed over the past several years, and it is a key move forward in our own transformation."
Added Cisco CEO Chuck Robbins, "We have worked with Ericsson during the last year on developing a strategy for future industry leadership, and can start executing together today. Our partnership will drive growth for both companies, unique value for our customers, and incredible innovation for the industry."
"The partnership makes a lot of sense, as we see the organizations as often complementary," wrote Simon M. Leopold, communications equipment analyst and managing director at Raymond James, in a commentary issued this morning. "Both companies bring intellectual property and R&D to the table. Cisco's greatest strengths lie in software, switching, and routing, along with its powerful enterprise channel, and Ericsson brings strength in wireless, services, and telco network management.
"The companies both are developing elements to address the evolution to more software-centric networks, and the degree of overlap is not clear to us," Leopold continued. "Ericsson also acknowledged an opportunity for SEK 1 billion synergies, and we imagine it may reduce its internal efforts to become a top three routing supplier, an ambition we've struggled to see succeeding. We see the alignment aiding the development of two major overlapping themes, the Internet of Things (IoT) and 5G wireless."
This is Ericsson's second major strategic partnership in recent years. The company partnered with Ciena Corp. (NYSE:CIEN) in February 2014 to collaborate on SDN and optical transport technology (see "Ericsson, Ciena pair on packet-optical transport, SDN development").
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