It’s an iWorld After All!

By Rich Silverman

Apple Computer and Cisco Systems announced recently that the two companies have reached an agreement to allow Apple to share with Cisco the iPhone name for its new telephone offering. Apple had been in negotiations with Cisco for the rights to use the iPhone all the way up to January 9th, the day of the product's public unveiling, but had been unsuccessful in acquiring them.

They were owned by Cisco Systems, which acquired them in 2000 and has been using them for over a year. The company's Linksys division had been using the name on Voice Over Internet Protocol (VoIP) phones that can make low cost calls using the Internet instead of traditional phone lines.

On January 10th Cisco sued Apple in federal court in San Francisco, alleging "willful and malicious" trademark infringement. Apple responded by calling the lawsuit "silly", but the two companies have been in on-and-off negotiations ever since.

This Wednesday, the two companies announced that they had reached an agreement allowing Apple to share the iPhone name in exchange for exploring "interoperability" of the two devices with Cisco in the areas of security and consumer and enterprise communications. No other details were announced.

The iPhone is a hand held device that is part telephone, part iPod MP3 player and part Internet device. It will be available through AT&T's Cingular wireless service beginning in June of this year with a starting price of $499. Apple CEO Steve Jobs predicts the company will sell 10 million units in 2008.

Apple, headquartered in Cupertino, CA has long been known as the maker of iconic computers and accessories that are extremely popular in the education and graphic arts markets. But with the introduction of the iPod and iTunes Apple has grown into a major player in the consumer electronics industry.
Cisco, based in San Jose, CA, is best known for making such products as the routers and switches that direct traffic over the Internet. But they are also pursuing the consumer market with such products as set-top boxes for home media systems and wireless routers for home networks.

Analysts have been speculating what the "interoperability" referred to in the announcement really means. One possibility is that the Apple iPhone will now acquire Cisco's VoIP technology. That would enable a user of the Apple iPhone to go to any wireless hot spot and surf the net, check e-mail, download a song or podcast from iTunes, do a Google search and even make phone calls.

Whether the two companies can and will work together is a subject of much discussion. Yankee Group analyst Zeus Kerravala feels the deal will work well for both companies. "Who gets the short stick?" he wonders. "Well, potentially Microsoft, since this helps Cisco be more of a consumer vendor and Apple to be more of a corporate vendor." But Kerravala wondered if the two companies, both vertically integrated, "can share the spotlight to leverage each other's strengths to come out with something better."