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FTC probe of Cisco still outstanding

Amid the high-tech legal machinations in Washington, one high-profile inquiry remains outstanding--a probe by the FTC of networking giant Cisco Systems.

2 min read
Amid the high-tech legal machinations in Washington this week, one high-profile inquiry remains outstanding--a probe by the Federal Trade Commission of networking giant Cisco Systems.

As chip giant Intel reaches a preliminary settlement with the FTC and Microsoft reportedly is considering its own antitrust deal, the Cisco inquiry may be the only remaining high-profile technology probe in flux.

Cisco was notified last fall that the FTC was looking into discussions the company held with competitors Lucent and Nortel.

Since Cisco turned over two boxes of documents to the FTC last fall, the company has heard nothing from the commission, according to a company spokesman.

The FTC is looking into possible collusion between Cisco, Nortel, and Lucent in an alleged effort to divide the networking market between them. The inquiry stems from partnership talks Cisco held with its two competitors over the course of 1997 and 1998.

A FTC spokeswoman refused to comment on the status of the inquiry.

Cisco chief John Chambers insisted last October that the FTC probe of his firm was a "small inquiry."

A Lucent spokeswoman said the company has not been contacted concerning the Cisco probe since last fall. A Nortel spokesman said they had also not been contacted.

Since the initial Cisco inquiry, several mergers and acquisitions in the networking industry, along with altered technology dynamics, have changed the competitive landscape.

The Justice Department today requested more information on the proposed merger between Lucent and Ascend Communications

Observers of the regulatory process note that since there is usually no overlap between investigations undertaken by the FTC and Justice Department, the request for more information on the Lucent acquisition could mean that the Cisco probe is faltering.

"The fact that the Justice Dept is now investigating the Lucent/Ascend transaction would suggest that the FTC's own investigation of Lucent and Cisco had not progressed to an advanced stage," said Howard Morse, an attorney with Drinker, Biddle & Reath and former FTC official.

Though Cisco is the leader in the data networking arena--with revenue of more than $8 billion for its most recent fiscal year--it could be viewed as under-sized compared to Lucent and Nortel, as well as to acquisition-hungry international firms Siemens and Alcatel.

Chambers has long viewed a few carefully selected partnerships as a key for Cisco going forward, allowing the firm to focus on its strengths and utilizing the expertise of others.

"We remain confident that having looked over these two boxes, the FTC will conclude that Cisco abided by the rules," a Cisco spokesman said.