Cisco and Ericsson to develop across different architectures
On November 9, Cisco (CSCO) and Ericsson (ERIC) announced a major partnership where both companies will develop new products. According to Cisco’s press release, “In a world driven by mobility, cloud, and digitization, the networks of the future will require new design principles to ensure they are agile, autonomous, and highly secure. Ericsson and Cisco will meet this challenge together by offering end-to-end leadership across network architectures including 5G, cloud, IP, and the Internet of Things – from devices and sensors to access and core networks to the enterprise IT cloud.”
The press release also mentioned that the partnership would bring in incremental revenue of $1 billion for both companies in 2018. Under the terms of the partnership, Ericsson will also receive patent licensing fees from Cisco.
Cisco’s partnership could help Ericsson overcome competition
More importantly, the partnership could help Ericsson overcome stiff competition posed by Nokia (NOK) and China’s (FXI) Huawei in the wireless equipment market. Incidentally, Nokia is in the process of acquiring Alcatel-Lucent (ALU) for a valuation of $16.6 billion, potentially making it a stronger player in the market.
According to a report from the Wall Street Journal citing Dell’Oro Group, Huawei, Ericsson, and the combination of Nokia and Alcatel-Lucent are the top three players in the worldwide market for wireless infrastructure equipment. As the chart above shows, these three players are closely ranked, with market shares ranging between 25% to 30%.
This shows the stiff competition that exist in the market. Although Cisco is a smaller player, it could help Ericsson develop cutting-edge technologies required to stay ahead of the competition. Let’s discuss this aspect in the next part of our series.