Merrill Lynch hangs up on Cisco

Merrill Lynch will replace its Internet telephony gear from Cisco Systems with new equipment from Avaya, sources said Thursday.

The financial firm is ordering enough Avaya equipment to supply 5,800 employees in its main New Jersey headquarters and another 1,800 at Merrill locations in Japan, sources close to the companies said. Merrill Lynch has used Cisco IP (Internet Protocol) telephone gear in these two locations since 2000.

"It's a total replacement" of the thousands of Cisco IP phones now in place at those locations, said a source familiar with the plans.

Merrill's apparent defection is part of an ongoing series of recent gains by Cisco competitors Avaya and 3Com in the worldwide market to supply IP telephone equipment. Cisco was the market leader at the end of 2002, selling about 44 percent of all IP telephone equipment. Avaya and 3Com both had 16 percent of the market, according to Synergy Research Group.

"During the fourth quarter, smaller vendors realized double-digit gains, reflecting the extensive opportunities for innovators in the market for IP telephony," said Jeremy Duke, a Synergy analyst.

Merrill Lynch turned to Avaya to solve "network outage issues," a representative said. She didn't provide additional details on Merrill's motivation.

A Cisco representative declined to comment Thursday, but did say that Cisco remains the market leader for such equipment, having sold about 1.6 million IP phones to date.

Businesses are converting their offices to IP telephony as a cost-savings measure. Traditional telephones need their own separate system, but IP telephones can run using an existing corporate computer network. IP telephony uses the Internet, rather than the toll roads of a privately owned telephone network. One version of IP telephony known as voice over IP currently has 2.2 million U.S. users.