Two of the world's top telecom-equipment giants, Ericsson AB and Cisco Systems, have announced a broad technology and commercial partnership that will create one of the most formidable conglomerations in the world of technology. With the partnership, each company is expected to generate additional revenues of up to $1 billion by 2018, according to NASDAQ.

The two companies' announcement came after Nokia took over Alcatel-Lucent SA in a massive $15.6 billion deal. Rivals such as China-based Huawei Technologies are also expanding at a very aggressive pace.

Ericsson noted that its partnership with Cisco means a significant boost for both companies in a number of key areas, including addressable markets, professional services, software, and the re-sale of prominent products, Reuters reported.

Ericsson Chief Executive Hans Vestberg believes that the partnership will create a company that is far more formidable on its own.

"We are the wireless No. 1 in the world. Cisco is by far the No. 1 in the world when it comes to IP routers. Together we can create innovative solutions," he said.

Together, the two companies will offer routing, data center, networking, cloud, mobility, management and control, and global services capabilities.

Cisco Chief Executive Chuck Robbins also believes that the partnership will usher in a new era of immense growth for both companies.

"The deal gives us an expanded reach around the world that we don't have today," he said.

The deal seems to be a welcomed decision for investors, as Ericsson's stocks rose by 2.8 percent after the announcement, far above the average of the STOXX Europe 600, which was up 0.4 percent.

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