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Why can't Apple, Cisco just play nice?

Cisco had hoped to forge an interoperability agreement with Apple in exchange for the use of its trademarked name "iPhone."

Apple's brash move to launch the iPhone without permission to use Cisco Systems' trademarked name was a major snub to the networking giant.

Cisco had hoped to strike an interoperability deal with Apple. The company's general counsel, Mark Chandler, said in an interview Wednesday after Cisco filed a trademark infringement lawsuit against Apple that the companies had been close to finalizing a deal the night before Apple CEO Steve Jobs took the stage at the Macworld Expo in San Francisco to announce the long-awaited iPod cell phone called the "iPhone."

But after "intense" discussions ended at 8 p.m. on Monday night, Cisco hasn't heard from Apple, he said.

One of the conditions of the deal was that Cisco wanted to work with Apple to ensure interoperability among the companies' product lines, Chandler said. While specific details of the negotiations haven't been made public, a Cisco representative indicated Thursday that the interoperability clause rejected by Apple would have encompassed a range of products from Cisco and Apple.

"In general, we were asking for the two companies to work together to make our products and technologies more interoperable with each other," said John Noh, a spokesman for Cisco. "In this case, interoperability was an important consideration because, as we've said, we see the potential for convergence of the home phone, cell phone, work phone, and the PC as limitless, and we see the network as the foundation for innovation that allows converged devices to deliver the services consumers want."

Apple declined to comment.

Over the past several years, Cisco has become a leader in the voice over IP market. It first sold this technology to large companies. And now, through its home networking division, Linksys, it's taking VoIP into the home. Specifically, Cisco/Linksys has partnered with companies such as Skype and Yahoo to integrate consumer VoIP services with wireless and cordless phones.

"Apple likes to keep control of the environment in which their products operate, so that nothing takes away from the value of the products."
--Tim Bajarin, Creative Strategies analyst

It's these products that The company has been showing off some of the products at this week's Consumer Electronics Show in Las Vegas. For example, the WIP320 Wireless G phone, which looks like a candy-bar style cell phone, accesses the Internet via any standard 802.11b/g Wi-Fi connection. Calls can be made using a Skype VoIP client.

Meanwhile, Apple's "iPhone" will use Cingular Wireless' cellular network to make and receive calls. The phone comes equipped with Wi-Fi, but Apple has made it clear that this feature is designed to allow users to download data and other multimedia onto their phones at broadband speeds when they are in a Wi-Fi hot spot, said Tim Bajarin, a principal analyst with Creative Strategies, who covers Apple closely.

Apple has not indicated that the Wi-Fi connection could be used to launch voice over IP calls, he added. In fact, Bajarin said that consumer VoIP clients such as Skype can't be downloaded onto Apple's iPhone.

"Apple has made it very clear that the iPhone is not a VoIP phone," Bajarin said. "The company wants to make it very clear that this is a cell phone; not a VoIP phone."

That said, it's unclear whether or not Apple would add this capability at a later time. And perhaps, close interoperability ties with Cisco could jeopardize or limit future plans to integrate with other companies' technology or with technology that Apple may develop itself, he speculated.

Historically, Apple has been very selective about the companies it works closely with.

"Apple likes to keep control of the environment in which their products operate, so that nothing takes away from the value of the products," he said. "And I can see Apple not wanting to tie themselves to any one technology, even though I really don't think they plan to make the iPhone a VoIP phone."

By contrast, it's easy to see why Cisco would want to work closely with Apple. For one, Cisco may want to ensure that the Apple iPhone works well with its Linksys wireless routers when users are downloading music or content via their Linksys Wi-Fi home network. Even though Wi-Fi is a standardized technology, and products from different vendors work well together already, there could be small advantages gained through special interoperability, said Lisa Pierce, a vice president with Forrester Research.

"Interoperability is a funny thing," she said. "In a way it's like a parking deck, and there are different levels of how well products using the same standard technology work together. If products are interoperable, they've been tested, and modifications have been made to ensure they work optimally."

But some analysts wonder if Cisco may have been looking for a deeper level of integration. In the iPhone family, Linksys has integrated software from Skype and Yahoo. There is a chance that Cisco was hoping to strike a similar deal with Apple that may have eventually put some of Apple's music software on the Cisco/Linksys iPhones.

Cisco may also have been trying to take a first step toward an even more comprehensive partnership with Apple, said Zeus Kerravala, a vice president at the Yankee Group.

"I've always thought an Apple/Cisco partnership would make sense," he said. "If they leveraged each other's strengths--Apple's understanding of consumers and user workflow and Cisco's expertise in networking and infrastructure--they'd make a powerful team."

But while Cisco has a track record of successfully partnering with other large companies, such as IBM or Hewlett-Packard, Apple does not typically operate this way.

And as a result, Kerravala conceded that an Apple/Cisco partnership is unlikely to happen. "It's just not in Apple's DNA."

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