The much-touted partnership between Cisco and Ericsson appears to be flailing. Ericsson CEO Borje Ekholm told investors at the company’s Capital Market Days today that the partnership won’t reach its target to generate $1 billion in revenue for each company by 2018.
Instead, Ekholm said that Ericsson is much more focused on figuring out the right strategy for its business and is spending less time “thinking about how we can best evolve the partnership with Cisco.”
Interestingly, Ekholm also said that while Ericsson believes that these types of partnerships like the one it has with Cisco are important for delivering end-to-end solutions to customers, he said that in reality few customers actually want that.
It was exactly two years ago that Ericsson and Cisco formed the partnership, which was highly lauded as a way for the two companies to more effectively compete in light of Nokia’s acquisition of Alcatel-Lucent. It was also a sign that both firms were finally moving into cloud-based services and products and away from relying on their traditional infrastructure product lines.
The partnership, which supposedly took 13 months to finalize, was set up so that the companies could share patents and develop products together. It was also intended to give both companies visibility with each others’ customers.
Just three months after the deal was announced, Ericsson and Cisco said that they had already signed a number of joint deals, and at Mobile World Congress in Barcelona, Spain, in February 2016, they said that they had closed on two service provider deals and had developed two joint products.
Hints of Trouble
But today’s revelation by Ekholm isn’t a total surprise. There have been hints over the past few months that the partnership was in trouble as Ericsson has been hit with some significant financial challenges. Former CEO Hans Vestberg who worked on the deal with Cisco CEO Chuck Robbins, lost his job in July 2016 after the company reported a 24 percent year-over-year drop in its second quarter 2016 net profits.
And in May 2017 it was announced that Rima Qureshi, the head of Ericsson North America and a key player in the partnership, had left the company.
Plus at Cisco Live 2017 in June, Robbins mentioned that while he and Ekholm agreed on the vision of the deal, Cisco was giving Ericsson some “space” on the partnership while Ekholm worked through some of his company’s issues.