Cisco seeks a little help from friends

Cisco doesn't know much about the wireless market and it's just getting its feet wet in telecommunications--two weak points that give cause for the company's recent string of partnerships.

What the company does know--Internet-based networking for corporations and service providers--has opened new doors to the wireless and telecommunications communities, two industries that are expected to catch the Net-based communications fever in the coming years.

Cisco today rolled out a wireless-focused alliance with Motorola that could result in $1 billion worth of investment over the next four to five years--a clear sign Cisco wants a piece of the wireless pie.

"This is definitely an indication Cisco is very serious about becoming a carrier-type company," said Virginia Brooks, vice president of networking and communications for industry consultants the Aberdeen Group.

The deal aspires to bring Net standards to the wireless world, allowing users to connect to information services from anywhere, using any type of Net-enabled device. "It's going to extend the power of the Internet to the wireless user," said Don Listwin, Cisco's executive vice president for its service provider and consumer lines of business.

Significantly for the wireless industry, the joint standards work is intended for networks based on the various wireless specifications currently used internationally: Global System for Mobile Communications, or GSM, Code Division Multiple Access (CDMA), and Time Division Multiple Access, or TDMA. In essence, the Net could become a unifying mechanism.

Software giant Microsoft also recently jumped into the wireless fray with Qualcomm to extend its Windows franchise to a host of new wireless devices.

Cisco and Microsoft have the same goals in mind--to extend their core businesses to new markets. Given Cisco's expertise with Internet protocol (IP), the transmissions method for the Net, it seems clear that any industry that embraces this same standard can reap huge rewards for the data giant, in terms of equipment and associated software sales.

"This is new enough that everybody is figuring out what they are going to do here," Brooks said.

Much like Microsoft, Cisco has sometimes been questioned concerning its "openness," or the manner in which it releases interfaces to third parties. But as the company moves into new markets, it seems clear that Cisco needs these connections in order to keep pace with veterans of the industry like Lucent Technologies and Nortel Networks.

"What Cisco is trying to do is make sure they are the Microsoft of the underlying IP infrastructure, where others can then build upon," noted Craig Johnson, principal with the Pita Group, a Portland, Oregon-based industry watcher. "They will continue to say they are open and will publish the interfaces, but really they are trying to get folks to standardize on their solution set."

Operating in the high-stakes telecommunications and wireless markets, Cisco has stressed its Net experience as the thing that sets them apart from other competitors. The company has chided traditional telco equipment providers for their so-called closed approach to the market--or when one company provides all of the hardware and software necessary for a carrier to implement a new service.

"[That approach] excludes the third party development environment from innovating," said Listwin. "The Lucent approach to this will be 'Lucent uber alles' and that's it."

Cisco has already used its close relationship with systems giant Hewlett-Packard to add telecommunications expertise to its portfolio of products. John Chambers, the company's chief executive, has often stated that a few select partnerships could mean the difference for the company as new markets develop.

The move could be a boon to Motorola, once a leader in wireless in the era of analog networks. But now that digitized networks, phones, and devices are populating the market, Motorola has lost its dominance.

Company executives believe they can regain their edge using this third wave of Net-based technology. "We can again present ourselves as the leader in the wireless industry," said Bo Hedfors, a senior vice president at Motorola.

The Cisco-Motorola alliance has the blessings of wireless players such as Sprint PCS and Nextel, as well as wireless guru Craig McCaw.

Cisco recently purchased some wireless technology of its own, though it seems clear the company will leave most of the hardware work to others like Motorola.