Nothing stokes the fire of buyout speculation more than partnership talks. Sure, networking giant Cisco Systems
Bill Owens, the new Nortel CEO, says his company is gearing up for consolidation in the industry. John Chambers, Cisco's CEO, says he'd love to have Nortel as a partner. In terms of closer ties, that's where things will end.
Cisco is no stranger to inking commercial alliances with other big equipment vendors, including Ericsson
A commercial partnership that brings to the table Nortel's optical and wireless technology, plus its big telecom carrier customer base, might work for Cisco. But a full-blown merger doesn't fit with Cisco's proven strategy of acquiring small, privately held companies with complementary technology. Nortel is not only big and public, but also competes directly with Cisco in the voice-over Internet protocol, or VoIP, market.
The fact remains that Chambers, even if he saw potential synergies emerging from a merger, knows full well that he would struggle to convince shareholders to do a deal. A corporate mess, Nortel has been floundering of late thanks to sagging growth, mounting litigation, and disturbing accounting issues. Until these problems get cleared up, Nortel will likely remain on the corporate world's "don't touch with a 10-foot pole" list.
Cisco knows better than to permanently tie its future fortunes to Nortel. This week's mergers-and-acquisitions chatter is just that -- chatter that investors can afford to overlook.
Fool contributor Ben McClure hails from the Great White North. He doesn't own shares of any companies mentioned here.