Cisco, Ericsson expect $2.8bn extra sales from new tie-up

Cisco and Ericsson are expecting to bring in at least US$1 billion (A$1.4 billion) each in extra revenue by 2018 as a result of their new partnership to build next-generation networks.

Executives at both companies today said the US$1 billion figure per business was the baseline, speaking of bigger ambitions for the years to come.

Mounting a spirited defense of the deal with investors at the Morgan Stanley TMT conference, Cisco chairman John Chambers and Ericsson CEO Hans Vestberg said the projected revenue boost only covered their partnership's first two years.

"We have much higher ambitions," Vestberg said, referring to revenue targets.

"If we do this right, there are other opportunities as well," Ericsson's CEO said of further sales growth ahead.

The deal, announced earlier this week, calls for each company to resell the other's products and expand the range of services they provide while working to merge mobile and fixed-line networks.

The first stage of the partnership will focus largely on providing equipment and services for telecom network operators aiming to upgrade their existing networks to the cloud.

A second stage will involve selling to corporate enterprises, and a third stage will cover the wider world of network-connected devices in cars, industry, retail and agriculture.

Chambers said US$1 billion in fresh sales would expand Cisco revenues by just 2 percent and add 3 percent to Ericsson's top line, but these targets have little incremental expense, boosting the profit ratios of both.

"If you are asking if we do phase one right, is there incremental upside? The answer is yes," Chambers said, adding that the two were being cautious in their predictions. Vestberg agreed there was also further upside for Ericsson.

"Partnership will be as important over the next two decades as acquisitions were over the past two decades for us," Chambers said. "If we do it right, our peers wont be able to keep up."