The motivation for Ericsson’s new partnership with Cisco was crystal clear today at the company’s annual capital markets day in Sweden. Ericsson is telling investors that it expects the total network equipment market to grow at a compound annual rate of just 1-3% during the years 2014-2018, with the telecom services market growing 3-5% during the same period. Ericsson said it wants to grow faster than the overall market.
Teaming up with Cisco may help the wireless giant achieve its goal by taking market share from competitors. Ericsson’s two largest rivals are Huawei and Nokia, which is buying Alcatel-Lucent. Ericsson will be a much tougher competitor with Cisco’s portfolio of products and services in its arsenal.
“The arrangement offers promise to the partners, and we think the news bodes negatively for competitors and partners, including Alcatel-Lucent, Nokia, Juniper and Ciena,” said analyst Simon Leopold of Raymond James. “We think the combination of Nokia and Alcatel-Lucent makes a lot of sense, bringing together Nokia’s strong wireless business with Alcatel-Lucent’s strong IP business; Cisco plus Ericsson brings together stronger IP and stronger wireless businesses.”
Companies that already have reseller agreements with Ericsson and Cisco may find themselves left out in the cold, however. Ciena has been Ericsson’s partner for optical networking equipment for almost two years, but now Cisco may take that spot. Juniper is another Ericsson partner that may see its relationship with the company deteriorate, now that Ericsson has partnered with Juniper’s top competitor. One thing is clear: Those long-standing rumors that Ericsson plans to buy Juniper will probably not pan out. Juniper shares fell almost 10% yesterday.
Smaller companies that have partnered with either Cisco or Ericsson may be able to find new opportunities in the alliance, or they may find that they need to look for new partners. Small cell vendor SpiderCloud Wireless told RCR Wireless News that its competitor Ericsson could end up selling SpiderCloud small cells, because they can be easily attached to Cisco’s Wi-Fi access points. SpiderCloud and Cisco have been partners for almost a year and have developed a clip-on module to attach SpiderCloud’s small cells to Cisco’s Wi-Fi access points. But of course Ericsson has its own small cell portfolio, and may already be working to integrate it with Cisco’s Wi-Fi.
One Cisco partner that probably won’t lose out in the new deal is Apple. Cisco and Apple announced their alliance this fall, giving the iPhone and iPad a new path into millions of companies. Now Apple and Ericsson are partners by association, giving Ericsson a potential new platform for its content distribution business.
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