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Cisco vs. Apple: who really won?

Jack Gold

Cisco and Apple have resolved their iPhone dispute. Before the dust has even settled, many analysts are saying that Apple won and Cisco lost, primarily because their agreement was centered around a vague promise that the two companies would work together in the future on security as well as consumer and enterprise communications products. Although most analysts believe this will never happen, I am not so sure. Yes, both companies are difficult to work with, and both have a major-league ego problem that hampers partnering with what they may perceive as lesser entities (or at least, it has in the past). But I think some analysts are being too jaded in their view. What if the agreement really is substantial and ultimately does hold? What if Cisco and Apple really can work together and share the iPhone label?

Both companies would benefit greatly if indeed they could make this arrangement work over an extended period of time. There is no question that Apple wants to be a major contender in the highly competitive mobile phone market. It is attempting to do so by leveraging its brand ubiquity in the portable entertainment area (e.g., iPod). Entertainment capability is becoming a key component (and major selling point) of newer, flashy cell phone models. Cisco, on the other hand, is using its brand (e.g., Linksys) and marketing muscle to try and dominate the consumer side of the VoIP telephony marketplace. (Of course, it is also doing so in the enterprise with Cisco-branded

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products.)

But it is quite clear that within three to four years, fixed mobile convergence (FMC) will be a key component of almost all wireless and VoIP providers' playbooks. We will be carrying around devices that can connect over cellular networks when we are on the street but connect over Wi-Fi when we are at home (or in the office). The need to be proficient at both cellular and VoIP will become a key attribute for any company wanting to make phones, whether packed with entertainment capability or not. By sharing the iPhone brand, Cisco could leverage its VoIP experience, while Apple could leverage its entertainment-oriented cellular phone experience. The two together could be greater than the sum of their parts. Is it such a stretch to envision Apple configuring an iPhone with VoIP in addition to cellular? And is it such a stretch to envision Cisco selling an FMC device that it obtains from Apple which also has entertainment features embedded? They could be cross-selling each other's products and sharing their engineering strengths to address the FMC market, not to mention their complementary distribution channels. This would benefit both companies.

So, even though many pundits may believe that Apple won this round and Cisco came out the loser, I am not so sure. I suspect this could really be a win-win situation if both sides take a longer-term view. Of course, agreeing to work together and actually working together are two different things, and agreements often fall apart. But in this case, both companies have much to gain if they can cooperate, and much to lose if they can't. Only time will tell.

Jack Gold is the founder and principal analyst at J.Gold Associates, an industry analyst firm specializing in wireless and mobile computing issues. He can be reached at jack.gold@jgoldassociates.com