Cisco wants partnership with Nortel
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Cisco wants partnership with Nortel
Cisco CEO calls partnerships 'way of the future,' quells talk that his company would buy Nortel.
June 17, 2004: 12:39 PM EDT
TORONTO (Reuters) - Cisco Systems Inc. chief executive John Chambers said Thursday the world's largest router maker would love to team up with Nortel Networks Corp., North America's biggest telecoms equipment supplier.
"I believe in strategic partnerships. I would love to have Nortel as a partner," Chambers told a question and answer session after a speech in Toronto. "I believe going to market together is the way of the future."
But he poured cold water on suggestions that San Jose, California-based Cisco, which makes machines that direct Internet traffic, would buy the beleaguered Canadian telecoms equipment maker, which is mired in accounting troubles.
"I don't know how to do large acquisitions," he said, adding that his company focuses on small buys with talent. But he also said: "Never say never."
Nortel chief executive William Owens told Reuters Wednesday that Nortel expected "a lot more emphasis on partners" going forward.
"I personally have had associations with a number of them (potential partners) and this is a great opportunity for us to provide bundled solutions that make real sense for our customers and can do a lot for our business," Owens said.
"I'm doing a number of things right now...I've met with several CEOs."
Brampton, Ontario-based Nortel said Thursday it was not focused on a particular partner, sector or company. "On partnerships, Nortel is open to possibilities and always looking at opportunities," said spokeswoman Tina Warren.
Shares in Nortel (NT: up $0.24 to $4.33, Research, Estimates) surged more than 7 percent early on Thursday, trading up 6.1 percent in midday trading on the New York Stock Exchange.
Cisco's (CSCO: down $0.51 to $23.37, Research, Estimates) shares slipped 2.1 percent in midday trading on the Nasdaq.
Nortel, a former market darling that's now wrestling with a much publicized accounting mess, is reviewing its financial statements for a period stretching between 2001 and 2003, and has said it will need to restate results for a second time.
It has fired several senior executives, including former CEO Frank Dunn.
Analysts welcomed any move by Cisco and Nortel to team up.
"Cisco is pursuing those types of partnerships," said Blaylock & Partners analyst Gabriel Lowy. "Any type of partnership of that ilk, where Nortel can get Cisco in the door, or further penetrated in the service provider market, would be very valuable to both companies."
"People are shifting their focus from the accounting issues to the underlying business and to us that's always been two very distinct issues."
Another analyst, who asked not to be named, said a partnership "could be huge because it essentially puts the leading data guy and one of the biggest telecom (equipment) guys together without officially making a merger."
Nortel is also seen winning a portion of at least two major wireless contracts that have yet to be announced, analysts said.
The company is widely expected to win the bulk of a GSM wireless contract in India, which Lehman Brothers believes could be worth around $500 million in revenues to Nortel over the next two years.
There are also expectations that Nortel will take a share of a Sprint upgrade. "We believe Sprint PCS will make an announcement regarding its plans for a 3G network upgrade in the coming weeks," wrote Prudential Securities analyst Inder Singh in a note Thursday. |
