Ericsson and Cisco formed a global business and technology partnership that is expected to generate at least $1 billion (€928 million) in extra revenue for each company by 2018.
In a joint release, the Sweden-based mobile network specialist and the U.S. networking company said the partnership would "combine the best of both companies", focusing on areas including routing, data centres, networking, cloud, mobility, management and control, and global services capabilities.
The goal is to create leadership positions in fields such as 5G, the Internet of Things (IoT), cloud and IP. The two vendors would also be able to better position themselves to meet the requirements of operators as they battle with growing data traffic and look towards the convergence of fixed and mobile networks.
The partnership will also help Ericsson at a time when it faces growing competition from rivals. Nokia and Alcatel-Lucent are close to completing a merger designed to create a stronger provider of mobile and fixed networks, for example.
In the third quarter of this year, Ericsson also reported sales and profits that were below analyst forecasts as the company grappled with lower sales in its networks business.
Liberum Capital analyst Janardan Menon told Bloomberg that the move makes sense from a strategy side, "but making the partnership work properly could be challenging."
The partnership is based on multiple agreements including a global service partner agreement, as well as a broad reseller agreement. The two companies added that they have also agreed to discuss FRAND (fair, reasonable, and non-discriminatory) policies and enter a licensing agreement for their respective patent portfolios.
Hans Vestberg, president and CEO of Ericsson, said: "This partnership fortifies the IP strategy we have developed over the past several years and it is a key step forward in our company transformation."
Vestberg also told Bloomberg that he did not believe in big mergers: "This is by far the best solution you can get…this is much faster and more efficient," he claimed.
Cisco CEO Chuck Robbins said the successful companies "will be those who build the right strategic partnerships to accelerate innovation, growth, and customer value."
"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," Robbins added.
The Sweden-based vendor said it expected to see cost savings of around SEK1 billion (€107 million/$115 million) from 2018, and noted that the additional sales are expected to be accretive to operating income as early as 2016.
Ericsson added that it would continue to explore further joint business opportunities with Cisco as the partnership progresses.
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