Cisco routes Ericsson deal

Cisco Systems is treading on Juniper Networks' turf as the networking giant seals a strategic partnership with Ericsson.

Marguerite Reardon
Marguerite Reardon Former senior reporter
Marguerite Reardon started as a CNET News reporter in 2004, covering cellphone services, broadband, citywide Wi-Fi, the Net neutrality debate and the consolidation of the phone companies.
3 min read
The battle between rivals in the networking equipment market is heating up as Cisco Systems forms a tighter alliance with one of Juniper Networks' closest and most lucrative partners.

On Wednesday, Cisco and Sweden's Ericsson announced an agreement to jointly sell and integrate key products to help telecommunications carriers migrate their older networks to new ones based on Internet Protocol.

The nonexclusive deal will allow Cisco, the world's largest maker of equipment that directs Internet traffic, and Ericsson to offer equipment and services to phone companies as these carriers start to offer Internet-based services such as voice over Internet Protocol. Many telephone companies are currently in the process of migrating their networks away from older circuit switched technology to IP.

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While the relationship could bring more business to Cisco, it could also hurt competitor Juniper, which counts Ericsson as one of its top partners. In 2003, Ericsson accounted for 13 percent of Juniper's total sales.

"This certainly is not good news for Juniper," said Joe McGarvey, senior analyst with Current Analysis. "There is potential that the Cisco relationship could harm Juniper."

Ericsson's relationship with Juniper began in 1997 with an initial equity investment. Since 1999, Ericsson has integrated Juniper's routers into its data networking portfolio. In 2000, the companies announced a joint venture to co-develop wireless Internet routing products to be sold exclusively by Ericsson. The first product from the joint venture, a device called the J20 that connects radio networks to an IP network, was introduced in February of 2002. Since 2001, Ericsson hasn't owned any shares in Juniper.

Cisco has had a basic reseller relationship with Ericsson since 1999. The new deal will extend that relationship into a strategic partnership. At first, the companies will focus on integrating two sets of product portfolios designed to help telephone companies migrate from their networks to IP. Ericsson's softswitch portfolio, a software product used to replace existing telephone switch technology, will be sold along with Cisco's core IP routers and switches, the companies said.

The companies also will integrate their broadband solutions to help carriers aggregate and transport this traffic over a new IP-based network. Specifically, Ericsson's digital subscriber line access multiplexer (DSLAM) will be paired with Cisco's 10000 broadband aggregation routers. Ericsson will use Cisco's Catalyst Ethernet switches to link traffic between the carrier's broadband access network and its IP core network.

Juniper has products that compete with Cisco in each of these areas except Ethernet switching.

Juniper and Ericsson are downplaying the impact the Cisco relationship might have on Juniper. Juniper said that it already shares many of the same partners with Cisco. For example, Lucent Technologies has a strategic relationship with Cisco to supply it with wireless networking equipment. It also has a similar relationship with Juniper to provide routing products for wireline deployments.

In addition, Cisco has a relationship with Siemens to jointly sell products to wireless service providers. Juniper, which bought Unisphere Networks, a spinoff of Siemens, has a tight partnership with the German telecommunications equipment supplier. In 2003, Siemens accounted for 15 percent of Juniper's overall sales.

Karl Thedeen, vice president of wireline products for Ericsson, said the partnership with Cisco was spurred by existing Cisco customers who wanted to migrate their networks to a next-generation infrastructure, but who didn't want to lose their investment in Cisco equipment. He said the company will continue to sell Juniper products, too.

"We will work with both Juniper and Cisco," he said. "Cisco has a large installed base of customers. Now we can provide customers with integrated solutions from Cisco and Juniper."

While it seems logical for Ericsson to sell Cisco gear to existing Cisco customers, what is unclear is which vendor Ericsson will choose when a customer doesn't have a preference. Ericsson will now be in a much better position to push new Cisco equipment, like the soon-to-be announced HFR (Huge Fast Router) next-generation router.

"These are nonexclusive relationships, so we will decide which one to use," Thedeen said. "But one thing is clear--we will not go to customers with two options. We will choose one or the other. It would only confuse customers."