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Analysis: who was the winner in the iPhone case?

Cisco got short end of stick, experts say

Although Apple and Cisco kept quiet yesterday on the details of their deal to share the 'iPhone' trademark, some analysts reckon Cisco got the short end of the stick.

On Wednesday, the two companies announced that they would both use the iPhone name on their products. They also pledged to "explore opportunities for interoperability in the areas of security and consumer and enterprise communications", according to a joint statement issued on Wednesday night.

Cisco, in a lawsuit filed in federal court last month, claimed the iPhone trademark via a 2000 acquisition of Infogear. The California company has sold a line of Linksys VoIP (voice over IP) devices under the iPhone label for over a year.

As part of the settlement, all legal action on both sides has been dismissed, but the rest of the arrangement's details remain confidential.

That didn't stop analysts familiar with Apple, Cisco and the iPhone brouhaha from speculating on who won and, more important, who lost at the negotiation table.

"The rule in Silicon Valley is that if Apple leaves the table smiling, the other guy got screwed," said Rob Enderle, an independent analyst and principal of the Enderle Group. "And Apple left the table smiling on this one."

Roger Kay, of Endpoint Technologies Associates, agreed. "It certainly looks like Cisco gave away the store."

Both Enderle and Kay said their take was based on the clear value of the iPhone name, and the vague interoperability promises made in the statement. "I'm not convinced that Cisco got what it wanted out of this," said Enderle. In the past, he added, Apple has made promises to partners that it didn't keep. "That's been a history of deals with Apple. The partner always regrets it."

Kay, on the other hand, assumed that some money must have changed hands. The direction: from Apple to Cisco. "It would be very odd if there wasn't some money exchanged, because Apple gets almost everything." Kay said the iPhone name could be worth as much as a "couple of hundred million."

Cisco declined to comment on the record beyond the official joint statement; Apple did not return a call for comment.

Neither Enderle nor Kay was surprised that a deal was struck. "Apple couldn't afford to go to court," said Enderle. Apple had argued publicly that its cell-phone-based iPhone was different enough from Cisco's VoIP iPhone to justify using the trademark. If that reasoning had won out, Apple would have opened itself up to similar justifications from rivals. "Others could have used the same argument with the iPod," Enderle said.

"Apple clearly got the better deal," Kay said. "Steve's [Jobs] ability to hypnotise people is legendary. He's like the Rasputin of the computer industry."

Technology lawyer Ken Dort backed up the analysts on the no-surprise front, saying that trademark disputes are usually settled before going to court - especially when the stakes are as high as in this case.

"I think everybody's a winner here," said Dort, a lawyer with McGuire Woods. "Apple gets a name that really tracks into its system of [trademarks], while Cisco gets some kind of development relationship with Apple. This does well for everybody."

Another analyst, Yankee Group's Zeus Kerravala, had a different take. "Who gets the short stick? Well, potentially Microsoft, since this helps Cisco be more of a consumer vendor and Apple to be more of a corporate vendor."

Kerravala, however, questioned whether Cisco and Apple can actually work together, agreement or not. "Apple and Cisco each made their mark by making things vertically integrated and where they own the ecosystem from end to end," he said. "The question is, can these two companies share the spotlight to leverage each other's strengths to come out with something better?"

If they can, and the promise of interoperability is credible, Kerravala sees an upside for both companies. "[They] should go beyond this naming decision and battle for the digital home in the Microsoft-oriented world. Both are viable competitors to Microsoft's strategy."

Matt Hamblen and Todd R Weiss contributed to this report.


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