Ericsson CEO Vestberg denies Cisco merger was ever on the table

Ericsson president and CEO Hans Vestberg sought to quell speculation the company was a takeover target of U.S. rival Cisco that arose after the two companies announced plans to partner on future network technology development.

Hans Vestberg, Ericsson CEO

Ericsson president and CEO, Hans Vestberg

In a statement issued this morning, Vestberg denied that the companies ever discussed a merger or acquisition during a year of negotiations leading up to the partnership announcement on Nov. 9.

"We note that there are rumours in the market regarding an acquisition of Ericsson by Cisco possibly spurred by the recent announcement of a partnership between our two companies," Vestberg said, adding: "The talks leading up to the partnership announcement have been ongoing for a year and there have not been any discussions whatsoever on a merger or acquisition."

Ericsson's statement echoed comments made by Cisco spokesman Nigel Glennie, who told Bloomberg that the companies had not discussed options beyond the partnership.

Glennie made the statement in response to speculation by a Swedish website that an acquisition of the Sweden-based infrastructure vendor had been discussed, Bloomberg reported.

The speculation was prompted by the companies' announcement of a partnership that will see them cooperate on developing technologies including 5G, the Internet of Things, cloud and IP. The companies predicted the partnership would generate at least $1 billion (€932 million) apiece in additional revenues by 2018.

At the time, Vestberg told Bloomberg he does not believe in mega-mergers -- for example like that currently being completed by Nokia and Alcatel-Lucent -- and that a partnership could be achieved more quickly and efficiently.

Following the partnership announcement, Cisco announced that it increased revenue and net income during its fiscal first quarter 2016, which covers the three months to Oct. 24. Revenue increased 4 per cent year-on-year to $12.7 billion, while net income grew from $1.8 billion in fiscal Q1 2015 to $2.4 billion in the recent quarter.

However, the company disappointed markets with predictions that its fiscal Q2 2016 revenue and profit would be lower than analysts' forecasts, MarketWatch reported.

Ericsson last month reported calendar third-quarter sales and profit below analyst forecasts, which the company said was due lower sales in its networks division on the back of slowdown in 4G rollouts in China.

While the figures were below analyst forecasts, key metrics including revenue and net income were both up year-on-year during the period. Net income grew 19 per cent to SEK3.1 billion (€332 million/$356 million), while revenue grew 3 per cent to SEK59.2 billion.

For more:
- see this Ericsson statement
- read this Bloomberg report on Cisco's denial
- see this Bloomberg article on the partnership announcement
- view this MarketWatch report

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