Ericsson announces $2 billion strategic partnership with Cisco

Networking giants Ericsson and Cisco have unveiled a broad strategic partnership that they expect to deliver additional incremental revenue of $1 billion for each company by 2018.

As is often the case with big corporate strategic moves like this, specifics are thin on the ground. Instead we get lots talk about scale, growth drivers, and accelerated innovation, with the inevitable nods to major industry trends like 5G and IoT.

Essentially this is being packaged as a ‘best of both worlds’ bundle for networking customers, with end-to-end solutions, joint R&D, cross-licensing, etc. One specific joint effort both companies will start working on immediately concerns SDN/NFV and network management and control.

“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,” said Ericsson CEO Hans Vestberg. “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.”

“Today’s announcement brings together two visionary industry leaders, with complementary cultures and track records of innovation,” said 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.”

A few of those customers were also moved to comment. “We welcome the partnership between Ericsson and Cisco which we believe will accelerate the pace of innovation across the communications industry as ultrafast networks, cloud services, and the Internet of Things become increasingly central to our customers’ needs,” said Vodafone CEO Vittorio Colao.

“Cisco and Ericsson’s announcement further reinforces the importance of seamlessly integrating IP and wireless solutions,” said AT&T CEO Randall Stephenson. “This type of initiative is in line with the plans and investments we’ve laid out over the last four years for integrated solutions.”

After all the aspirational talk has died down comes the complicated business of getting two huge, diverse multinationals to play nice in the name of partnership. There will presumably be areas in which the companies previously competed that need to be resolved, as well as all the other commercial, logistical and cultural boxes that will need ticking.

At a time when mega-mergers are back in vogue, a mega-partnership is an interesting alternative, but we may have to wait a year or so to see how it plays out. Investors were moderately positive with Ericsson shares up nearly 3% at time of writing.

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