Ericsson, Cisco partner to create 'networks of the future' and garner USD 1 billion additional sales

Ericsson and Cisco - two industry leaders in the development and delivery of networking, mobility, and cloud - are coming together for a global business and technology partnership to create the networks of the future and garner more than USD 1 billion revenues by the end of 2018.

The multi-faceted relationship will offer customers the best of both companies: routing, data center, networking, cloud, mobility, management and control, and global services capabilities. Together the companies plan to deliver customer value by:

•Offering service provider customers an end-to-end product and services portfolio, and joint innovation that accelerates new business models,

•Creating the mobile enterprise experience of the future through a highly secure technology architecture for seamless indoor/outdoor networks, and

•Channeling the combined scale and innovation of both companies to accelerate the platforms and services needed to digitize countries and create the Internet of Things.

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. Customers will be able to accelerate their business transformation by drawing on the parties' complementary capabilities, including global services capabilities such as consulting, integration, and support to managed operations across IT and networks.

This announcement will be supported by multiple agreements that include commitments to network transformation through reference architectures and joint development, systems-based management and control, a broad reseller agreement, and collaboration in key emerging market segments. The parties have also agreed to discuss FRAND policies and enter a licensing agreement for their respective patent portfolios, enabling unfettered joint innovation and providing certainty for customers of both organizations. As part of this agreement, Ericsson will receive license fees from Cisco.

Ericsson and Cisco are strong and complementary partners, with a combined 56,000+ patents, $11 billion of research and development investment, and more than 76,000 services professionals serving customers across more than 180 countries.

The strategic partnership will be a key driver of growth and value for the next decade, with each company benefiting from incremental revenue in calendar year 2016 and expected to ramp to $1 billion or more for each by 2018. New and greater opportunities are also expected, as the partnership enables both companies to drive their efforts and investments to deliver value in growth markets.

Speaking on this development, Hans Vestberg, President and Chief Executive Officer, Ericsson, said, "I am excited to work with Cisco on continuing to shape the Networked Society. Foremost, we share the same vision of the network's strategic role at the center of every company's and every industry's digital transformation. Initially the partnership will focus on service providers, then on opportunities for the enterprise segment and accelerating the scale and adoption of IoT services across industries. For Ericsson, this partnership also fortifies the IP strategy we have developed over the past several years, and it is a key move forward in our own transformation."

Chuck Robbins, Chief Executive Officer, Cisco, explained, "With the pace the market is moving, the successful companies will be those who build the right strategic partnerships to accelerate innovation, growth, and customer value. Today's announcement brings together two visionary industry leaders, with complementary cultures and track records of innovation. We have worked with Ericsson during the last year on developing a strategy for future industry leadership, and can start executing together today. Our partnership will drive growth for both companies, unique value for our customers, and incredible innovation for the industry."

This announcement is supported by multiple agreements including a global service partner agreement, as well as a broad reseller agreement. The parties have also agreed to discuss FRAND policies and enter a licensing agreement for their respective patent portfolios.

Hans Vestberg, President and CEO, Ericsson, says: "This partnership fortifies the IP strategy we have developed over the past several years and it is a key step forward in our company transformation."

As a result of the partnership, Ericsson will extend its addressable market and is expected to generate USD 1 billion or more of additional sales by 2018 (full year). The extended addressable market is primarily in professional services, software and resell of Cisco products.

The additional sales are expected to be accretive to operating income already in 2016. The partnership is expected to generate full-year effect from synergies, primarily in expenses of SEK 1 billion in 2018.

Ericsson and Cisco will continue to explore further joint business opportunities as the partnership progresses.