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Cisco, Lucent won't partner

Citing an overlap in products and strategies, Cisco's chief executive says the two firms will not work together.

SAN JOSE, California--The window of opportunity for data communications leader Cisco Systems to partner with telecommunications giant Lucent Technologies has closed, according to Cisco's chief executive.

"We've talked about it very aggressively--it's just not going to happen," said John Chambers, president and chief executive of Cisco, in an interview at the company's headquarters.

Equipment providers in the data networking and telecommunications industries continue to point to several indicators--such as the growth of data traffic across traditional phone networks--as evidence that a rapid, Net-driven convergence is taking place, offering users a single pipe for their voice, video, and data needs.

As a result, data-driven firms such as Cisco, 3Com, and Bay Networks, among others, continue to seek partnerships with veterans of the voice-based networking world, hoping to fill in the blanks in their portfolio of capabilities.

3Com joined with Siemens AG last fall for that purpose, and the current rumors surrounding a possible merger of Bay and Northern Telecom revolve around the same premise.

Chambers has long said there was a certain period when his firm could effectively partner with Lucent or Nortel. Both would fill the North American component of Cisco's strategy to form alliances in certain segments of the industry. Evidently, Lucent's recent acquisition binge has left little room for cooperation.

"Our products are overlapping too much and our strategies are overlapping too much," Chambers said.

Since late last year, Lucent has purchased gigabit-speed start-up Prominet, remote access player Livingston Enterprises, and data, voice, and video concentration specialist Yurie Systems in deals totaling $1.85 billion, making it clear the company is serious about data networking.

Chambers said the two firms stopped talking about a possible partnership a few months ago.

But the CEO held out hope that Cisco and Nortel might work together, a partnership that could douse merger talk involving Bay. Nortel, based in Canada, has made it clear that it wants a larger piece of the data networking pie. "I would like to have a better relationship with Nortel," Chambers said.

Cisco already has developed a partnership with Alcatel, a European giant, and the company has covered its bases in Asia via informal work with NEC, Chambers said.

Going forward, Chambers predicted there would only be three to five viable players in the networking market, taking into account the convergence of voice, video, and data, and the tendency for customers to want to work with a few select companies to satisfy their information technology needs.

"This industry is going to consolidate," he said. "My own view is the majority of my competitors will get bought over the next two years."