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Archive for Friday, February 23, 2007

Details murky on Cisco-Apple ‘iPhone’ truce

February 23, 2007

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Apple CEO Steve Jobs demonstrates the new iPhone during his keynote address Jan. 9 at MacWorld Conference & Expo in San Francisco. Cisco Systems Inc. and Apple Inc. said Wednes-day they had settled the trademark-infringement lawsuit that threatened to derail Apple's use of the "iPhone" name for its much-hyped new iPod-cellular phone gadget.

Apple CEO Steve Jobs demonstrates the new iPhone during his keynote address Jan. 9 at MacWorld Conference & Expo in San Francisco. Cisco Systems Inc. and Apple Inc. said Wednes-day they had settled the trademark-infringement lawsuit that threatened to derail Apple's use of the "iPhone" name for its much-hyped new iPod-cellular phone gadget.

— The short-lived legal battle between Cisco Systems Inc. and Apple Inc. over the "iPhone" name was only on the surface a trademark-infringement dispute involving identically named multimedia telephones.

Cisco has maintained since the start of the squabble six weeks ago that the dispute was not about money, even though it stood to profit handsomely from any settlement.

Instead, the networking gear maker said it was trying to pressure Apple to break its attachment to closed, proprietary systems and begin collaborating with Cisco on imaginative future products that can communicate with each other.

But industry analysts said Thursday the settlement between the Silicon Valley tech giants does not mean that Apple suddenly will open its most lucrative technologies, particularly the iTunes library that has helped catapult Apple into the top ranks of music retailers worldwide.

The more likely scenario, they said, is that Cisco and Apple could partner in the near-term on lower-profile projects that leverage the respective strengths of the world's largest networking equipment company and the new darling of digital entertainment.

Some of those efforts, they said, could include integrating Cisco's Voice over Internet Protocol, or VoIP, technology into Apple's iPhones, which currently are designed to operate only over the cellular network; improving the ability of Apple computers to work securely with wireless home routers from Cisco's Linksys division; or generally developing ways for both companies' products to work seamlessly with each other.

Analysts cautioned against expecting any type of major concessions from Apple concerning its proprietary technology, citing the vague joint settlement statement from the companies that raised more questions than it answered.

"As far as concessions go, from Apple's point of view, is there a downside to making their products work better with Cisco's networking gear? I don't see a downside for them," said Charles Golvin, principal analyst with Forrester Research Inc. "If anything it makes their products that much more attractive."

Gene Munster, senior research analyst with investment bank Piper Jaffray & Co., said talk of collaboration is "noble language" but he is not expecting any blockbuster joint products to emerge from the partnership.

"Apple wanted that to be the impression because they get a lot of pressure for being closed," he said, adding that he suspects money played a more crucial role in the negotiations than either company let on. He estimated that Apple paid Cisco between $25 million and $50 million for rights to the name.

Both companies have refused to comment on terms of the deal and are staying tightlipped about what future products might come from the settlement, which allows Cisco and Apple to both use the iPhone name worldwide to sell their phones.

Cisco sued Apple last month in San Francisco federal court claiming that Apple's use of the iPhone name violated a trademark Cisco has held since 2000 and is using on a line of Linksys phones that make free long-distance calls over the Internet using VoIP technology.

The two sides said late Wednesday they had agreed to drop any pending litigation against each other over the trademark as part of the deal.

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