Mark Evans

Nortel-Cisco Marriage Only a Matter of Time?

For conspiracy theorists out there, Nortel's decision to hire two ex-Cisco executives in the past month - Garry Daichendt and Gary Kunis - raises the idea something significant could happen between Nortel and Cisco down the road. Nortel's senior executive suite now features Daichendt as president and COO, and Kunis, who was named CTO yesterday. Daichendt used to be Cisco's senior v.p. of worldwide operations until 2000, while Kunis was chief science officer until 2002. Cisco now has two “friendlies” within Nortel so it can easily establish lines of communications to make deals. If both management teams know each other, you never know if casual conversations over dinner and drinks could lead to something bigger - a multi-billion dollar acquisition, for example.
Yeah, yeah, Cisco doesn't do mega-deals but Cisco CEO John Chambers apparently said recently he would be open to doing something out of the norm. Nortel would give Cisco a major foothold in the carrier and wireless markets. It would also provide Chambers with a way to give some of his young bucks such as Mike Volpi a huge professional challenge to keep them happy and in the fold.
For more thoughts about a Cisco-Nortel relationship, here's what TD Securities analyst Chris Umiastowski had to say today in a report:
“Could there be a Cisco takeover in Nortel's future? We aren't prepared to suggest Cisco will take a run at Nortel, but we believe that the chances of this happening are surely better with these new management hires. To be clear, we doubt that Nortel's board of directors actually had a takeover by Cisco in mind when it made these hiring decisions. But, it seems to us that Cisco would find Nortel to be a more attractive (as opposed to less attractive) takeover target once the new management team moulds the company more towards its way of running a business.
But would Cisco even want to buy Nortel? Cisco has always said it isn't interested in such a large acquisition, but it does want to get more into the carrier markets, (and in particular, the wireless market). So, from a product and customer relationship perspective, Nortel seems to be the perfect fit. And it's not like money is stopping Cisco; its market capitalization is 10 times Nortel's. Last year, John Chambers (Cisco's CEO) even publicly commented on his interest in partnering with Nortel, and met with Nortel's CEO Bill Owens.”