Ericsson and Cisco: praise for the non-merger

The news broke this week that mobile network supremo Ericsson and Cisco, a pervasive and dominant force in IP networking, plan to form a partnership in order to benefit from each other's strengths in a changing and increasingly competitive world.

Media and analysts alike jumped on the fact that the two industry giants plan to partner and not merge -- a critical difference from the approach taken by rivals Nokia and Alcatel-Lucent, which still have yet to conclude their merger process.

Indeed, the relief is palpable. We are saved from endless months of rumour and speculation as the market waits for this or that regulatory body to approve this or that aspect of a possible deal, which might or might not ultimately be approved.

We are also saved from the endless speculation that would undoubtedly then ensue over how long it would be before such a merger fell apart. Indeed, the telecoms industry is strewn with the debris and fallout of failed mergers from years past. Although a partnership is going to require a great deal of work to get right, it certainly carries less risk. Ultimately, both partners could walk away with no need for a messy divorce.

Ericsson CEO Hans Vestberg has certainly been highlighting the advantages of a partnership over a merger.

"I don't believe in big mergers -- this is by far the best solution you can get," he told Bloomberg. "This is much faster and more efficient."

So what do Ericsson and Cisco want to do? They said they want to build the "networks of the future", focusing on cloud, NFV and SDN, 5G, the Internet of Things (IoT) and IP networking. They also expect the arrangement to generate $1 billion (€932 million) in additional revenue for each company by 2018.

The impact of the agreement is expected to be huge. It aims to tackle the challenges both companies face from a fast-growing Huawei and a combined Nokia/Alcatel-Lucent.

Roger Gurnani, EVP and chief information and technology architect at Verizon Communications, summed up what many are thinking: "This global partnership has the potential to reshape the industry."--Anne