Cisco and Ericsson today announced a new wide-ranging partnership that will have the net effect of adding $1 billion to each company's revenues by 2018. The new partnership focuses on growth areas for the two companies and is not intended to replace any existing efforts.
In an early morning conference call with press and analysts, Cisco CEO Chuck Robbins said that the two companies have been in discussion about a partnership for the last 13 months. Robbins emphasized the size and scope of the partnership as being a key competitive differentiator and business accelerator for both vendors.
The two vendors will engage in cross-patent licensing of each company's respective patent portfolio, bringing over 56,000 patents in total. Robbins also emphasized the services reach that Ericsson brings as being critical to Cisco. Cisco has approximately 11,000 people in its services organization, while Ericsson has 65,000.
As part of the partnership, Ericsson will resell Cisco hardware, while Cisco gets access to the Ericsson services organization, creating a partnered services organization of 76,000 people around the world.
"This is not a normal partnership," Hans Vestberg, President and CEO of Ericsson, said during the call. "This is the largest partnership we have…This is a big bet for both of us."
Vestberg said that both Cisco and Ericsson expect the partnership to drive up to $1 billion in additional revenues for the two companies by calendar 2018.
While Ericsson will now be able to resell Cisco gear, and Cisco will get access to Ericsson's services and management technology, the two companies have not yet provided granular detail on precisely how the $1 billion in new revenue will be generated.
Robbins called the Ericsson agreement "a partnership of choice" that represents the best option forward for both companies.
"Historically, we have looked at M&A [mergers and acquisitions] activity, but we believe this is the right move for us," Robbins said. "We have had some questions why not merge, but we think this brings the innovation from both sides and allows us to move now and bring solutions to customers immediately."
Vestberg emphasized that there is very little overlap between what Cisco and Ericsson offer, though there are some products at the edge of the network. He added that the majority of the Cisco partnership opportunity represents new business and is not replacing existing Ericsson capabilities.
Ericsson has had a long partnership with Cisco rival Juniper Networks that will likely be impacted by the new Cisco partnerships.
"We have had a resell agreement with Juniper for many years," Vestberg said. "That's there, but we are now getting a far broader portfolio with end-to-end capabilities and we'll have joint development in addressing a new market."
Sean Michael Kerner is a senior editor at Enterprise Networking Planet and InternetNews.com. Follow him on Twitter @TechJournalist.