Cisco, EDS close to $15 billion network upgrade deal with GM

Cisco and EDS are close to landing a $15 billion network upgrade and outsourcing deal with General Motors, a financial analyst reported this week.

Merrill Lynch research analyst Tal Liani issued a report on the potential five-year contract, which would involve the installation and management of new Cisco IP data and voice network gear by integration giant EDS.

Cisco declined to comment on the report or any potential deal with GM.

The report says that GM is looking to upgrade to a corporate-wide IP telephony infrastructure and to consolidate its data centers with Cisco equipment. The IP voice part of such a contract alone would be huge for Cisco, Liani writes, as “GM currently has over 200,000 employees in North America. And at a price of around $200 per Cisco IP phone, “this implies $40 million worth of revenue simply for upgrading GM’s phones.” The estimated size of the deal also does not account for IP PBX, power-over-Ethernet switches, routers VoIP gateways and other gear that would be required for such a large-scale project, the report says.

The report says that the deal should not be affected by GM’s recent restructure announcement in November 2005, with it plans to cut 30,000 jobs and multiple plants in the U.S.: “GM and the system integrators have been working on this contract for 18-24 months with low likelihood of cancellation at this stage. However, some cutbacks in contract value are possible, and subject to decisions on plant closings and/or layoffs.”

Cisco and outsourcing partner SBC landed a $100 million IP telephony and network upgrade deal from Ford in 2004. Cisco also has large-scale IP telephony project in progress with EDS at Bank of America.