The sticking point apparently was Cisco's demand that in order to use the iPhone name, Apple would have to open up its famously closed products to communicate with some of Cisco's offerings.
Neither company would discuss what future products might come from the collaboration. But analysts said the deal could help both companies strengthen their positions in the increasingly fierce battle to deliver video and other applications through the network directly to consumers' homes.
Zeus Kerravala, a network infrastructure analyst with Yankee Group, said there are ample opportunities for the companies to dream up collaborative projects to win over consumers.
One possibility, he said, could be the creation of a Linksys device that users call into to record podcasts that are then automatically uploaded to iTunes, which would make the creation and dissemination of such programs easier.
However, he cautioned that both companies need to be willing to share in order to make the partnership work.
"If the two actually can work together, then the combination of the two is obviously more powerful than the two butting heads," he said. "There's no company out there that understands network service like Cisco. And you could argue no other company understands user experience like Apple."
The dispute highlights the shifting business strategies for both companies.
Cisco, which is Silicon Valley's most richly valued company with a market capitalization of $166 billion, makes most of its money by selling the routers and switches that direct data traffic over computer networks.
However, the San Jose-based company is also making an aggressive push into the consumer market and toward products that help deliver content, such as cable set-top boxes, wireless broadband routers for the home, and equipment for playing digital music.
Cupertino-based Apple is also expanding its business range from beyond primarily a Macintosh computer and software maker as it capitalizes on the demand for digital music and the soaring popularity of its iTunes and iPod products.