Why did iPhone talks collapse?

Apple's brash move to launch the iPhone without permission to use Cisco's trademarked name was a major snub to the networking giant.

Cisco had hoped to strike an interoperability deal with Apple. The company's general counsel, Mark Chandler, said in an interview on Wednesday after Cisco filed a trademark infringement lawsuit against Apple that the companies had been close to finalising a deal the night before Apple chief executive Steve Jobs took the stage at the Macworld Expo in San Francisco to announce the long-awaited iPod mobile phone called the "iPhone".

But after "intense" discussions ended at 8pm on Monday night, Cisco hasn't heard from Apple, he said.

One of the conditions of the deal was that Cisco wanted to work with Apple to ensure interoperability among the companies' product lines, Chandler said. While specific details of the negotiations haven't been made public, a Cisco representative indicated on Thursday that the interoperability clause rejected by Apple would have encompassed a range of products from Cisco and Apple.

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"In general, we were asking for the two companies to work together to make our products and technologies more interoperable with each other," said John Noh, a spokesman for Cisco. "In this case, interoperability was an important consideration because, as we've said, we see the potential for convergence of the home phone, [mobile] phone, work phone, and the PC as limitless, and we see the network as the foundation for innovation that allows converged devices to deliver the services consumers want."

Apple declined to comment.

Over the past several years, Cisco has become a leader in the VoIP market. It first sold this technology to large companies. And now, through its home networking division, Linksys, it's taking VoIP into the home. Specifically, Cisco/Linksys has partnered with companies such as Skype and Yahoo to integrate consumer VoIP services with wireless and cordless phones.

It's these products that Cisco has labelled "iPhones". The company has been showing off some of the products at this week's Consumer Electronics Show in Las Vegas. For example, the WIP320 Wireless G phone accesses the internet via any standard 802.11b/g Wi-Fi connection. Calls can be made using a Skype VoIP client.

Meanwhile, Apple's "iPhone" will use Cingular Wireless' cellular network to make and receive calls. The phone comes equipped with Wi-Fi, but Apple has made it clear that this feature is designed to allow users to download data and other multimedia onto their phones at broadband speeds when they are in a Wi-Fi hotspot, said Tim Bajarin, a principal analyst with Creative Strategies, who covers Apple closely.

Apple has not indicated that the Wi-Fi connection could be used to launch VoIP calls, he added. In fact, Bajarin said that consumer VoIP clients such as Skype can't be downloaded onto Apple's iPhone.

"Apple has made it very clear that the iPhone is not a VoIP phone," Bajarin said. "The company wants to make it very clear that this is a [mobile] phone; not a VoIP phone."

That said, it's unclear whether Apple would add this capability at a later time. And perhaps, close interoperability ties with Cisco…