UPDATE - BellSouth, Cisco in communications marketing pact
Monday June 2, 9:56 am ET
By Ben Klayman
ATLANTA, June 2 (Reuters) - Local telephone company BellSouth Corp. (NYSE:BLS - News) and Internet data network equipment maker Cisco Systems Inc. (NasdaqNM:CSCO - News) said on Monday they entered a pact to encourage companies to shift communication services such as Internet voice transmission to BellSouth.
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Atlanta-based BellSouth, the No. 3 U.S. local telephone company, will ring up sales by supplying the services, while Cisco, based in San Jose, California, will generate revenue as a provider of a range of Internet voice transmission, optical and wireless local area network gear to the phone company.
BellSouth's core business is focused on a nine-state region in the southeastern United States. The services include secure Internet-based networks known as virtual private networks, among various offerings.
Financial terms of the deal were not disclosed. However, either company can continue to work with other companies, they said.
Cisco has signed similar deals with AT&T Corp. (NYSE:T - News), SBC Communications Inc. (NYSE:SBC - News) and Sprint Corp. (NYSE:FON - News). Cisco said there is little overlap among the various agreements.
"The result is actually bigger than the sum of its parts," Bill Smith, BellSouth chief technology and product development officer, said in a telephone interview.
"We are very aggressively moving into this next-generation networking space and the growth that we continue to see in data networking is something that we absolutely intend to be a part of," he said.
The deal also includes optical gear to pipe traffic over BellSouth's traditional voice network. Generally, Cisco supplies equipment for data in contrast with voice networks.
BellSouth is trying to take advantage of Cisco's strength with large corporate customers, also known as the "enterprise sector." Meanwhile, Cisco wants to boost its sales to telephone companies while also increasing its presence among BellSouth's vast small- and medium-sized business customer base.
Cisco derives upward of 80 percent of its sales from the enterprise sector, with the rest coming from telecommunications network operators. Cisco has said previously it wants to boost the telecom portion of its business to more than 40 percent of sales over the next five years.
Virtual private networks, or VPNs, use secure connections over the public Internet to provide remote offices or individual users with access to their organization's network. VPNs are seen as far cheaper than leased-line communications traditionally supplied by phone companies to businesses.
The U.S. market for Internet-based virtual private networks is expected to grow from $1.8 billion in 2002 to almost $3.2 billion this year, and to about $6.2 billion by 2005, according to analyst Charles Carr of market research firm Gartner Inc.
"It allows them to leverage each other's sales people and marketing," Carr said of BellSouth and Cisco.
The Cisco-BellSouth partnership was timed for the opening day of Supercomm, the largest annual trade show for the U.S. telecom equipment industry, which is taking place in Atlanta this week. |
