Cisco is working with Ericsson because the merger is too difficult?

In the fast-paced technology industry, sometimes the big manufacturers are at a disadvantage -- like Cisco Systems and Ericsson, the largest providers of wired and cellular network infrastructure. The two companies are so large that it is too difficult for the authorities to approve market giants they might want to build through mergers, so they will announce a series of strategic alliance plans to resell each other's products and services. And is committed to creating a closer patent licensing agreement.

The partnership is a sensible move under pressure – rivals Nokia and Alcatel-Luncent announced a $16 billion merger in April (see reading), which will set up a With annual revenues of $28 billion, it is better than Huawei, currently ranked as the world's second-largest Internet equipment maker, but still far behind Ericsson.

The customer base of these network equipment providers has begun to blur, data center leaders like Google, are working to become fiber and wireless service providers; large network operators are building larger data centers, trying to provide the Internet Road services to defeat the world-wide Google and Facebook that are turning them into dumb pipes for advertising services.

For those companies, it is reasonable to look for a supplier that can provide all the systems they need and find their neck when the system goes wrong; Nokia/Alcatel-Lucent's merger is steadily moving toward that goal. Going forward, but for Cisco/Ericsson, the road to integration is much longer and bumpy.

If Cisco and Ericsson want to merge, I guess the Chinese government authorities will be the most objectionable; China's Huawei and ZTE (ZTE) are the most successful technology companies in the region, and the merger will face the greatest risk.

According to a statement from Cisco and Ericsson, the strategic alliance between the two companies is expected to generate revenues of more than $1 billion for each of them in 2018 (see reading); Ericsson in particular needs growth momentum – according to Reuters Reported that the company's sales so far this year has declined by 7%, and the performance in the past three years is flat.

Most of this year's “integration and madness” sweeping the high-tech industry is focused on reducing costs in this mature market, rarely to improve performance. In the semiconductor industry alone, at least 18 piles have been seen so far this year, with a total value of more than $100 million. As for the data center, Dell is bidding for $67 billion in October to acquire EMC. Combine its server and switch business with EMC's storage system (see reading).

Cisco and Ericsson will be happy to reduce the parallel work, but it seems unlikely that it will be achieved without consolidation; for example, Cisco has become a significant server vendor across the data center, and Ericsson is also a little this year. A similar strategy was announced early.

Therefore, the strategic alliance is the second choice between Cisco and Ericsson. If the two companies say that they want to merge, I am afraid that the national authorities will change their face; this is also a good choice for the employees of the two companies, because they do not Will face the layoff crisis that may arise from business mergers... Then we should turn our focus to China and see that Huawei and ZTE also want to merge?

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