Qwest, Cisco team in uncertain environment

The company pledges to purchase large amounts of Internet gear from Cisco Systems over the next several years as it attempts to finalize mergers with US West and Frontier.

2 min read
Qwest Communications International has pledged to purchase large amounts of Internet gear from network equipment maker Cisco Systems over the next several years, even though much of the investment is predicated on proposed multibillion-dollar takeovers currently in a fragile state.

Today's move comes amid uncertainty for Qwest as it attempts to finalize mergers with US West and Frontier, two companies also being courted by Global Crossing.

Despite the flurry of activity surrounding the upstart carrier, Qwest said it chose to roll out an expansion of its alliance with Cisco in order to cement the two companies' relationship and make clear its intentions if the more than $40 billion merger goes through.

Qwest's deal with Cisco is said to be worth as much as $1 billion over the next several years.

Qwest already has made large purchases of Cisco's high-end GSR 12000 routing device, the company's fastest network technology, to build out its Internet protocol (IP)-based network.

"Qwest has a very clear vision going forward, leveraging Internet technology," said Larry Lang, vice president of marketing for Cisco's service provider organization. "We're betting on Qwest being successful one way or another."

Qwest also may want to recruit Cisco at a time when Wall Street is looking on the once high-flying company's intentions with some skepticism, according to some.

Under terms of the deal, Qwest is committed to working with Cisco to develop a series of technologies for the Net. "Cisco and Qwest together will build an organization that will work as one," said Michael Gold, Qwest's senior vice president of IP and multimedia product management for.

On the Qwest merger front, at least for now, the ball appears to be in US West and Frontier's court.

Frontier's board of directors could review the offer and respond as early as this week, Reuters reported yesterday, citing unnamed sources. Frontier's board has not yet met, according to a spokeswoman.

Separately, US West has not said when its board of directors is expected to meet concerning Qwest's unsolicited bid for the regional phone company. "Our board will review the offer in due time," said US West spokesman Jeremy Story.

Meanwhile, Qwest said its board of directors will reconvene when the company receives a response from US West and Frontier. No timetable has been set. A company spokeswoman declined to comment on the proposed deal, but Qwest reportedly is unlikely to sweeten its terms, despite its falling stock price.

The Qwest stock offers, announced Sunday, were superior until Wall Street reacted unfavorably. Stock in Qwest has dropped 19 percent since closing at 44.88 Friday and closed at 36 today.

Reuters contributed to this report.