FTC Ends Investigation into Cisco's Partnership Discussions

Strategic Insights -

The Federal Trade Commission has closed its nine-month investigation into partnership discussions held by Cisco Systems Inc. with Lucent Technologies Inc. and Nortel Networks Corporation of Canada. Cisco's general counsel, Dan Scheinman, stated that the FTC had concluded that the practices in question were not an issue, indicating that Cisco has been cautious and conservative in its approach. The investigation was prompted by news reports last summer suggesting Cisco's willingness to agree to certain conditions in a deal with a potential partner, potentially limiting competition in the communications market.

Key Takeaways:

  • The Federal Trade Commission (FTC) has ended its nine-month investigation into Cisco Systems Inc.'s partnership discussions with Lucent Technologies Inc. and Nortel Networks Corporation of Canada.
  • Cisco provided two boxes of documents to the FTC, which was concerned that the company had improperly attempted to divide the communications market.
  • The FTC's investigation was prompted by news reports last summer suggesting Cisco's willingness to agree to certain conditions in a deal with a potential partner, potentially limiting competition in the communications market.
  • Dan Scheinman, Cisco's general counsel, stated that the FTC's conclusion demonstrates Cisco's caution and conservatism in its business approach.
  • Lucent Technologies Inc. and Nortel Networks Corporation of Canada refused a proposed deal with Cisco in which they would refrain from moving into Cisco's main product area: high-speed Internet switches.
  • Cisco is the No. 1 maker of data communications equipment, while Lucent and Nortel are North America's biggest makers of traditional telephone equipment.
  • Cisco's investigation coincided with major acquisitions in the data communications industry, including Nortel's purchase of Bay Networks Inc. for $9.1 billion in stock and Lucent's acquisition of Ascend Communications Inc. for $20 billion.

Statistics:

  • Cisco provided two boxes of documents to the FTC during the investigation.
  • The FTC's investigation lasted for nine months.
  • Lucent agreed to acquire Ascend Communications Inc. for $20 billion.
  • Nortel acquired Bay Networks Inc. for $9.1 billion in stock.
  • Cisco is the No. 1 maker of data communications equipment.
  • Lucent and Nortel are North America's biggest makers of traditional telephone equipment.

Sources:

  • The New York Times
  • Federal Trade Commission
  • Cisco Systems Inc.
  • Lucent Technologies Inc.
  • Nortel Networks Corporation of Canada