What are you announcing?
IBM and Cisco Systems, Inc. today announced a $2-billion technology agreement, a new relationship for Internet products and offerings, and a strategic alliance with IBM Global Services.
Why are you doing this?
By complementing each company’s core strengths, this alliance will allow IBM and Cisco to deliver solutions that provide enhanced network and systems performance. Customers becoming e-businesses demand higher levels of security, availability and applications performance. IBM and Cisco will collaborate in areas such as policy management to provide infrastructures that speed the deployment of e-business capabilities to deliver these higher levels of services.
This partnership will provide customers with greater flexibility in developing mid- to long- term networking strategies through an expanded product portfolio. In addition, it will allow companies to quickly and easily implement next-generation networks through a combination of new services. To assist customers with a smooth transition to Cisco Internet solutions, the two companies will also establish migration project offices to identify and handle joint customer opportunities, plus create interoperability labs to test solutions.
What are the agreements?
Today’s agreement includes:
-- A commitment from Cisco to purchase IBM technology and products over the next five years;
-- Acquisition by Cisco of the IBM Networking Hardware Division’s routing and switching intellectual property and technology. IBM will cease to sell and develop routing and switching products to new customers. IBM will continue to offer and support Systems Network Architecture controllers and Token Ring Technologies, and support through its worldwide sales and distribution channels;
-- A strategic alliance between IBM Global Services and Cisco to offer a full spectrum of services for e-business and networking solutions worldwide;
-- Jointly developed offerings to provide a smooth transition for customers to implement Cisco internetworking solutions
What are the terms of the agreements?
The aggregate value of the deals is $2 billion to IBM for the purchase of OEM technologies and intellectual property, and the IGS portion of the alliance is for a term of five years. We are not disclosing any further details of the deal.
Does this mean that IBM is exiting the networking hardware business?
The deal calls for the acquisition by Cisco of the IBM Networking Hardware Division’s routing and switching intellectual property and technology. IBM will cease to sell and develop routing and switching products to new customers. IBM will continue to offer and support Systems Network Architecture controllers and Token Ring Technologies, and support through its worldwide sales and distribution channels.
But does this mean IBM will discontinue its own products (other than 37XX and Token Ring), particularly in the Ethernet and ATM spaces?
Yes, that is correct. We believe that by partnering with Cisco we can provide our customers with a more complete set of products, offerings and services than either party can on its own. Again, we and Cisco will continue to support IBM’s existing customers with the products and technologies they are currently using and provide a migration path to newer products and technologies as those customers elect to adopt them.
What are the migration plans?
IBM and Cisco are establishing migration project offices, extensive interoperability test labs and are creating migration plans for various customer scenarios to ensure smooth transitions. We expect to begin rolling those plans out to customers within the next 30 days.
But in the past year IBM has introduced a large number of Ethernet products that you have claimed are competitive. Why give up now?
IBM has produced a very competitive set of Ethernet products, from the standpoint of price and performance, and we are growing market share. But customers are demanding end-to-end e-business solutions now that neither Cisco nor we can provide on our own. By focusing on our complementary core competencies (server, software, services and technology offering for IBM, and Cisco’s very strong Internet-based capabilities) we will provide those end-to-end solutions that will allow our customers to be more successful in the emerging Internet economy.
What is IBM’s commitment to its switching and routing installed base?
IBM will continue to service and support installed equipment for up to four years, depending on the life of the service contract. We’ll also be working with Cisco and our customers to ensure a seamless transition to new products and technologies from any discontinued products through activities such as migrations plan and interoperability testing. (See question 7)
What will happen to the people who currently work in IBM’s Networking Hardware Division?
We will deploy transition plans globally, consistent with local law and customs, and business needs to determine how individual employees will be affected. NHD employees in the U.S. and LaGaude, as well as those, who service and sell our products around the world, will be provided further information on these transition plans within the next week.
What is the timetable for the employee transition plans?
U.S. law requires a 30-day review period by the Department of Justice before we can implement changes. While that review is taking place, we will establish the transition plan. As stated above, we will deploy transition plans globally, consistent with local law and customs, and business needs to determine how individual employees will be affected. NHD employees in the U.S. and La Gaude, as well as those who service and sell our products around the world will be provided further information on these transition plans within the next week.
How many people does IBM Networking Hardware employ?
About 1,500 in the United States (mostly in Research Triangle Park, N.C.) and about 200 at our lab in La Gaude, France. In addition, we employ about 700 people around the world to sell our products.
Will you resort to layoffs?
At this point it would be premature to discuss that option. As I mentioned, the whole matter will be in review with the DOJ for a minimum of 30 days, and we cannot proceed until then. (See answer 11)
When will employees find out if they are affected?
See previous answer.
What happens to those employees who do not remain with NHD and are not offered a position either elsewhere within IBM or with Cisco?
Again, our intent is for all affected employees to either remain in their current positions or find new ones with either Cisco or IBM. Beyond that, we really can’t comment on that until we’ve had an opportunity to work through the transition program.
Some reporters and analysts have been saying you should do this for years. Why now?
It’s a matter of both companies involved reaching the same conclusion that we can provide greater value for our customers by collaborating than competing in this particular space. IBM will now have access to the most extensive line of networking products available, and Cisco will benefit from our strengths in services, software, servers and technology.
Are you doing this because IBM Networking Hardware is losing money?
No, IBM Networking Hardware remains profitable. This alliance is a reflection of how quickly the market is growing and our ability to provide customers with the complete solutions they require to become e-businesses.
What are IBM Networking Hardware’s revenue and market share numbers?
We typically do not release that type of information for individual product units within IBM.
What happens to the OEM effort you recently announced (ala Dell, Acer, EMC, etc.)?
We will continue with our OEM efforts as we have been in partnership with our sister unit, Microelectronics Division, to provide leading-edge communication chips and subsystems, such as our Prizma switching fabric chips and soon our new Rainier IP packet chipsets. Cisco will have access to that technology as well for its own products.
If an IBM NHD employee is offered a job with Cisco, do they have to take it?
No, but in all likelihood they will need to seek another position either with Cisco and elsewhere within IBM.
How many NHD employees this will affect?
It’s difficult to say at this point, but it’s safe to say that the majority of our NHD employees will see some change -- the organization needed to support our 37XX controllers and Token Ring products will be significantly smaller than our current staffing levels for the entire division.
What does Cisco get as part of the deal to acquire IBM’s networking hardware IP and technology?
Cisco has purchased IBM’s patents and inventions in the networking hardware space and has a cross license for the full IBM patent portfolio. (Note: the deal does NOT include branded products, facilities, and employees although some employees may be offered and accept jobs with Cisco as a result of this deal.)
Specifically, what kind of services will IBM Global Services offer today for Cisco products?
The IBM suite of solutions includes network design and connectivity, procurement, installation and systems integration, asset and inventory management, and hardware and software maintenance.
What changes as a result of this new agreement?
Through this new strategic alliance, IBM Global Services is making its Cisco services portfolio available worldwide. Companies will also be able to turn to IBM Global Services for all of their Cisco support needs -- from network consulting and design, to procurement, implementation and maintenance. As part of this support, IBM Global Services will position hundreds of certified Cisco specialists strategically around the world to assist customers with their network migrations. IBM Global Services and Cisco will also partner to build solutions around Cisco products to address customers e-business projects, open Internet-based architectures for data, voice and video services, and other business needs. To better serve customers, IBM Global Services will participate in Cisco’s Global Support Partner Program and Gold Partner Certification Program, and Internet Ecosystem.
How much money does IBM Global Services expect to make from this alliance?
IBM will not speculate about revenue. (Off the record - this agreement has the potential to be a multi-billion dollar services partnership)
Cisco has service and support agreements with other companies, such as KPMG. How will the alliance with IBM affect those agreements?
Cisco’s Internet Ecosystems is non-exclusive, and Cisco will continue to work with the other companies and leverage their services to support customers where appropriate, based on their specific capabilities in reaching different customer sets. In the case of IBM, IGS provides a global reach and breadth of services that is unique to the industry.
Will Cisco lead with IGS in proposing customer solutions?
Yes, in cases where IGS has an established relationship with the customer and in cases where the two are proposing an NHD-to-Cisco product transition. In other cases, the service partner will be based on the needs and preferences of the individual customers.
What type of solutions will IBM Global Services and Cisco develop jointly?
IBM and Cisco will build solutions combining Cisco products and IBM services to address such customer needs as network migrations (ex. SNA to IP) and new business opportunities (ex. Internet services).
Does this alliance mean IBM Global Services will no longer use non-Cisco networking products in customer solutions? Will IBM only use Cisco products?
No, this alliance will not preclude IBM from using non-Cisco products. IBM Global Services is a platform-neutral company. We will use Cisco products where and when appropriate, and also upon customer request. The same will hold true for other vendors' products.
What if an NHD customer does not want to transition to a Cisco product set?
For customers that wish to evaluate other options, IBM provides an extensive range of networking consulting, design, implementation and maintenance offerings. Working together, IBM and the customer can develop a migration plan tailored to the customer's unique needs.
How does today’s announcement affect the networking patent licensing agreement IBM recently signed with 3Com?
There is no affect, because it is a different type of agreement. The 3Com deal was simply a cross-patent agreement, whereas the Cisco deal was an acquisition of the intellectual property rights. All existing cross-licensing agreements, such as 3Com’s, remain in affect.
What will happen to NHD channel partners, VAR’s, resellers, ISPs and distributors? Will Cisco include in these partners in its existing channel programs?
Cisco and IBM will work together to create a channel migration plan for existing IBM business partners. We expect to have this completed within 30 days.
Will Cisco products work with my installed base?
IBM and Cisco are currently creating migration plans, establishing project offices and forming interoperability testing labs to evaluate such inquiries and provide solutions.