Shares in Ericsson were down almost 14% in morning trading Thursday after the company announced disappointing Q1 results and a restructuring aimed at driving further growth and profitability into the tech giant.

Sales dropped 2.4%, to 52.2 billion kroner (US$6.4 billion), off from the 54.4 billion kroner expected by analysts, according to estimates compiled by Bloomberg. Gross operating margins slid to 33.3% from 35.4% in the year-ago period.

In its new structure, which takes effect July 1 and designed to bring more agility and speed to the company, Ericsson will operate under five business units, and one dedicated customer group for Industry & Society.

Its core business will be made up of Business Unit Products and Business Unit Services, and will seek growth opportunities via its new IT & Cloud business units (Business Unit IT & Cloud Products and Business Unit IT & Cloud Services) along with a new Business Unit Media.

"The changes we are making will make it easier for our customers to do business with us, whether they are an operator, a media company or from another industry,” Ericsson president and CEO Hans Vestberg said, in a statement. “The changes will also take into account the different characteristics, needs, and pace of each of the businesses we are in. I am convinced this will make us even more competitive and enable us to grow both our company and our earnings.”

Shares in Ericsson were down $1.36 (13.95%) to $8.39 each in morning trading Thursday.

Amid heated competition from rivals such as Huawei Technologies and Nokia (which closed its acquisition of Alcatel-Lucent in January), Ericsson and Cisco Systems forged a business and tech partnership last November focused on building next-gen networks.

Ericsson shot down a report claiming that Cisco Systems and Ericsson are talking about a merger just days after the companies forged a far-reaching technology and business partnership.

Swedish daily Dagens Industri reported that Cisco is seeking a deal with Ericsson's board and major shareholders on a possible takeover.

"We note that there are rumors in the market regarding an acquisition of Ericsson by Cisco possibly spurred by the recent announcement of a partnership between our two companies,” Ericsson president, CEO and board member Hans Vestberg said in a statement issued Monday.  “The talks leading up to the partnership announcement have been ongoing for a year and there have not been any discussions whatsoever on a merger or an acquisition."

The business agreement, announced on November 9, covers joint development, product reselling, and collaboration in key emerging markets, and seeks to create an additional $1 billion in incremental sales for each company by 2018.

The day it was announced, Cisco CEO Chuck Robbins said a partnership, rather than a merger, was the option that that would enable both companies to pursue their business goals at the most rapid pace.

“We think that this brings the innovation from both sides and allows us to move now. It allows us to absolutely deliver solutions to our customer immediately,” Robbins said.

A far-reaching technology and business relationship forged by Ericsson and Cisco Systems will focus on next-gen networks and wired/wireless convergence and virtualization, but it also spells trouble for several of their networking rivals.

“[W]e think this news bodes negatively for competitors and partners, including Alcatel-Lucent, Nokia, Juniper and Ciena,” Raymond James analyst Simon Leopold said in a research note issued Monday in the wake of the Ericsson-Cisco agreement.

Investors seem to agree, at least with respect to Juniper, whose shares were down 7.88% in mid-day trading Monday. Feeling less of the brunt was Ciena (down 1.85%), Alcatel-Lucent (down 0.86%), and Nokia (down 1.46%). Ericsson shares were up 1.35%, and Cisco’s were down 1.09%.

Leopold said the new relationship makes business sense for Ericsson-Cisco, in some of the same ways it does for the pending merger between Alcatel-Lucent and Nokia.

“Both companies (Cisco and Ericsson) bring intellectual property and R&D to the table,” Leopold said. “ Cisco's greatest strengths lie in software, switching and routing, along with its powerful enterprise channel, and Ericsson brings strength in wireless, services, and telco network management."

While he is optimistic about the partnership, which ties together similar challenges and objectives, Leopold warned that many such arrangements have not panned out. Juniper and Ericsson have been partnered up for several years, but have “suffered after Ericsson acquired Redback,” he pointed out.

On a call Monday to discuss the deal in more detail, top execs with Cisco and Ericsson highlighted the incremental growth opportunities it presents, and focused less on how the agreement will impact existing partnerships with other vendors.

Ericsson and Cisco have been in discussions about the deal for about 13 months, with a “significant acceleration” in those talks in the last six months, Cisco CEO Chuck Robbins said, noting that Ericsson’s service reach (65,000 people in that group) complements Cisco’s much smaller 11,000.  “It’s very much about looking out ahead of what’s in the markets and dramatic transformation of networks and IT.”

“This is a big bet for both of us,” added Ericsson president and CEO Hans Vestberg.

Both Vestberg and Robbins will have management oversight of the partnership, which aims to create an additional $1 billion in incremental for each company by 2018.

Why not just merge the companies? Robbins said partnership was the best way to accelerate the goals that the companies can bring to the table with their respective products and technologies.

“We think that this brings the innovation from both sides and allows us to move now. It allows us to absolutely deliver solutions to our customer immediately”

Vestberg agreed that Ericsson had options to build, buy or partner to fulfill its longer-term missions, “and partner was the only way forward in order to make it efficient.”

“We believe this is the right move for us, right now,” Robbins added.

Vestberg said Ericsson’s existing vendor partnerships will remain intact, and views the Cisco deal as a growth opportunity that will also enable the company to broaden its portfolio.