Ericsson CEO Hans Vestberg and Chuck Robbins, his opposite number at Cisco, spent 13 months negotiating the wide-ranging strategic partnership announced on Monday.
"This is not a normal strategic partnership. This is way beyond it," said Vestberg, on a conference call.
The deal will see Ericsson resell Cisco products, and Cisco integrate its equipment with Ericsson’s network management and OSS/BSS solutions. The aim is to provide telco customers, and eventually enterprises, a one-stop-shop for mobile, data centre, and IP network infrastructure, as well as associated services and back office solutions.
Ericsson and Cisco will also collaborate on research into 5G technologies and the Internet of Things (IoT). They have also agreed to establish a cross-licensing agreement covering their respective patents.
"Networks of the future require us to take new design principles," noted Robbins, on the call; he said that Ericsson and Cisco spent more than a year "building a tremendous amount of trust between the two organisations."
With such an all-encompassing agreement between two companies with complementary portfolios, some might wonder why Ericsson and Cisco have not gone a step or two further and established a joint venture, or agreed a merger.
A strategic partnership, rather than a merger, "brings innovation from both sides and allows us to act now," Robbins said.
Vestberg said it allows both companies to move a lot more quickly than if they formed a joint venture.
Nonetheless, Monday’s deal is expected to generated US$1 billion (€929.7 million) in incremental revenue for each company in calendar 2018. In addition, Vestberg said he expects the agreement to save Ericsson 1 billion kronor (€107 million) by the same year.
"This is a big bet for both of us," he said.
