Cisco Ericsson merger could simply make or break the businesses of both parties

A couple of days ago the news broke that Cisco Systems Corporation is interested in teaming up with Ericsson in order to boost both businesses. The companies were tipped to sign a deal to become network partners and boost each other’s sales by $1 billion in the coming years. The alliance formed between both parties has its fair share of positives however there are equal negatives in store as well. Cisco is the networking giant which owns both wired and wireless businesses whereas Ericsson is a major telecom company and specializes in wireless sector. However, both are aiming to dominate all the areas that come under carrier deployments.  

These companies have a lot in common. At one point, they can easily do business on their own but on the other hand both companies need each other to take it to the next level. Cisco Systems and Ericsson have been under serious pressure lately from the Chinese companies such as Huawei. Furthermore, the increasing market presence of the newly merged Nokia Alcatel imposes great threats on the companies as well.

With all of this happening, both companies are strong enough to dodge these threats and win their respective quarters. Or they could help each other’s businesses to grow significantly which is unlikely to happen. It is believed that if both parties sign a deal then their main objective will be to generate extra sales worth at $1 billion for each of them in the next 3 years. The companies know how to make it work as they have been doing it in the past by including technologies from smaller vendors. However if they get along with each, it will be a matter of time that they would be dominating the sector.

The Register reports, “The focus of the deal is around cloud computing and the IoT (internet of things, or of everything if you listen to Cisco execs), and Ericsson will receive patent license fees from its new friend, which also expects to save SEK1 billion ($115m) a year, from the deal in costs.”

The CEO of Ericsson, Hans Vestberg, recently told Bloomberg in an interview that he is not a big fan of big mergers in the industry. However he realizes that this is the best solution that it can get as it will prove to be faster and more efficient. He added, “This deal is mostly about the wireless opportunity, still far larger than the fixed networking and video markets we talk most about in Fault line.” 

Cisco stock was up 2.21% to $26.79 at market close on Monday.