Cisco will buy Ericsson

Governments will swiftly clear regulatory merger rules as Industry 4.0, IoT and the Cloud will need an American-European technological behemoth to counteract the Chinese Huawei and ZTE prowess. For the EU and the US, Cisco-Ericsson would be a bulwark against Huawei and ZTE taking over Industry 4.0, IoT and the Cloud.

The number of telecom equipment makers was reduced from 15 several years ago to three today Nokia, Ericsson, Huawei and with ZTE also playing a part. The last round was Nokia buying Alcatel to get scale to compete with Huawei and ZTE. In further consolidation, Ericsson selling to Huawei or to ZTE is not an option due to market access to the US. Of course we never know if Huawei could persuade Mr. Trump or Ms. Clinton...

The rise of the ITelco

For all practical purposes the telco industry has already become IT industry. Now it is ITelco. The published goal of Cisco and Ericsson is to bring each company a full platform spanning cloud IT and all kinds of networks.

This has been slow to produce results. Probably resulting from a clash of cultures and philosophies and the predictions were over optimist. 

Cisco always wanted to be a Telco supplier

The Ericsson slim down will accelerate further. LM Ericsson CEO Mr. Hans Vestberg is hoping to double the amount of operating expenses to be cut by 2017. This is pointing to Ericsson preparing to sell to Cisco with the slimming down plan already in place instead of selling and leaving the burden of the slimming down to the buyer.

Preparing Ericsson to meet Cisco

 Ericsson current market capitalization is $24.0-Billion. Cisco can get Ericsson on the cheap in the next quarters which could be empty.

Svenska Dagbladet, citing unnamed sources, reported that the way accounting has been used to report future sales could hit future earnings reports.

"When we have dug so deep into the future to be able to uphold 'reported' sales today, there is a big risk there will be a couple of totally 'empty' quarters ahead," an Ericsson source told Svenska Dagbladet

The newspaper cited the sources as saying that most of the company's long-term contracts had already been reported as sales. Ericsson defends practices as report questions revenue accounting

Cisco Systems is currently sitting on a $60.4-billion cash pile and is generating $10.0 billion in free cash flow. CSCO stock is yielding 3.5%. The company’s current balance sheet and income statement ensures an investor will not be losing any sleep worrying about a potential dividend cut.                                                                 A third of cash is held by 5 U.S. companies

Martin Zander, VP, group strategy programs at Ericsson, told Light Reading that the two companies chose to partner rather than merge because partnering would be faster than clearing the regulatory hurdles for a merger. They wanted to work fast to achieve goals of innovation, growth and speed. Look no further than to Nokia-Siemens and Alcatel-Lucent joint ventures to see the challenges to get two telco suppliers to deliver together. 

What does that mean to the industry?

Industrievarden and Investor, which own 37% of Ericsson: Get a new CEO to replace Mr. Hans Vestberg. They need a new CEO to stop the bleeding to avoid Cisco getting Ericsson on the cheap.

Huawei can approach the operators with the message: We are ready to deliver. Why wait for the consolidation Cisco Ericsson? Besides Huawei could tell Mr. Trump that if they made China Great again, surely they could offer some help to Mr. Trump to make America Great again too...

Huawei wants to look good in the picture

Nokia can come out with the message: We are the good to go bulwark to oppose the Huawei steam roller. Do not wait for Cisco buying Ericsson we already consolidated.

Nokia has bulked up! 

Private equity investors: can analyze the possibility of buying Ericsson’s Microwave Network

Networkers and Rize: Need strategy to recruit for the combined world of ITelco.

Ericsson employees: If your boss puts in front of you a voluntary retrenchment proposal, take it.

 The head count

Cisco CEO message: We are buying very good assets, at a very good price and we will win big.  Leicester, an English football club, did just that last season...