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Cisco's Consumer Branding Crisis

At CES, Cisco Systems Inc. (Nasdaq: CSCO) showed off grand ambitions for consumer networks, but analysts say the company is light years away from being a household name in consumer electronics.

Last week's CES keynote from CEO John Chambers laid out Cisco's ambitions, which he said are in the "outline" stage, with details undetermined. (See CES: Cisco Preps Home Invasion.) But so far, analysts don't think Cisco is showing much consumer savvy.

"Cisco doesn't have the cachet with 19-year-olds," says Zeus Kerravala, an analyst with Yankee Group Research Inc. "With the consumer, it's about branding and the user experience, and less about good technology. Cisco will have to go through some growing pains."

Cisco has consumer products from its Linksys and Scientific Atlanta acquisitions. But neither brand is particularly famous on a consumer scale. Arguably, its most famous consumer product is the iPhone, and that's only because Apple Inc. (Nasdaq: AAPL) decided to use the name. (See Cisco Files iPhone Suit). Cisco declined to comment for this story (even the non-iPhone parts).

Even Cisco's newer consumer products so far have been closer to Cisco's IT heritage -- network-attached storage that was introduced at CES, for instance. And there's recent talk, reported by Unstrung, that Cisco could get into the market for home base stations. (See Cisco Eyes Home Base.)

What Cisco needs, some analysts say, is a product that gets in the consumer's face. "The thing about being a consumer electronics company is gaining visibility in that role. Cisco is a trusted brand, but it isn't something you buy to hook up and make your stereo work," says Rob Enderle, principal of the (what else?) Enderle Group .

Cisco might be thinking along these lines with its home media adapter, a potential Apple iTV competitor that Cisco showed to a select few at CES. (See Cisco Adapts to iTV .) And analysts pointed to other possibilities related to TV.

"What would be interesting is: What if Cisco made an HDTV?" Kerravala says. "They own the network up to the set-top box. That would be one way to get the Cisco logo out in front of people."

Enderle thinks a new set-top product -- something beyond the Scientific Atlanta box that the cable company hands you -- would make more sense for Cisco. It's a capability the company already has, and it would give Cisco some brand cachet when it comes to moving data around the home, he says.

Cisco can't count on its marketing savvy to carry the day, because it's all IT-based. Consider the way it sells its consumer products: It's Linksys, not Cisco, that shows up on the shelves of Target and Wal-Mart, the kinds of stores where most consumer electronics are sold. Richard Doherty, principal analyst of The Envisioneering Group points out: "Consumer Electronics doesn't start and end at Fry's."

Tapping outside expertise could help. "I'd love to see a business-card list of executives Cisco has hired from the marketing side of consumer electronics," says Doherty. "You've got to connect with the audience."

It's possible Cisco could end up being the behind-the-scenes company, making all this network stuff happen while not providing any of the equipment the customer touches. The open-standards philosophy Chambers preached certainly speaks to that idea. But analysts don't see Cisco being happy in that role.

"I don't think they will be satisfied being just the plumbers. I don't think they spent all that money changing the logo just to be plumbers," Kerravala says.

Analysts agree that Cisco's future appears to be tied to finding growth in those areas that are closer to consumers and farther away from routers and switches. "You know why Cisco is even in this position? They own every bit of the market they're in," Kerravala says.

— Craig Matsumoto, Senior Editor, Light Reading

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Pete Baldwin 12/5/2012 | 3:16:21 PM
re: Cisco's Consumer Branding Crisis Five years ago, I scoffed at the idea of a Microsoft living room, but the Xbox is giving them a viable story there. They've got the edge over Cisco at the moment.

There's also Apple, but I don't know ... I have to think Apple's traditional lack of openness is going to be a handicap here. (Sony isn't exactly open either, but they're SONY -- they have a head start.)
chips_ahoy 12/5/2012 | 3:16:20 PM
re: Cisco's Consumer Branding Crisis I think that this is going to end up as a sink hole for cisco as it goes so far outside their core strategy. There simply is no way to buy their way into a huge market share enabling them to muscle suppliers as they do in their current businesses. Additionally, not having pre-eminent market share will preclude them from enforcing their will on standards bodies (another current source of competitive advantage). Finally, this is not a market where customers have the types of switching costs that are associated with enterprise networking equipment. You have to keep 're-winning' your customers which required huge PR.

Just seems like a bad idea.

Full disclosure: I didn't think that Xbox was a good idea either.
materialgirl 12/5/2012 | 3:16:20 PM
re: Cisco's Consumer Branding Crisis We are entering the age of convergence, where everything will look different. If CSCO can enable that transition, or help to define it, demand will take care of itself. The trick here will be to get your company identified as the larger transition, just as Wintel did with PCs. Chambers is as good at marketing as Jobs. But he does not know Hollywood the same way.
tsat 12/5/2012 | 3:16:19 PM
re: Cisco's Consumer Branding Crisis
There is a market for much better set-top boxes. The current ones quite frankly, suck.

If Cisco can use their SA technology to develop a truly revolutionary set-top box, they might have a chance to break into consumer electronics.

Otherwise, a wi-fi linksys router or network attached storage will never be sexy. Just ask Seagate.

-tsat
palaeozoic 12/5/2012 | 3:16:19 PM
re: Cisco's Consumer Branding Crisis
Why would a company that has made boatloads of money selling network equipment into enterprise and service provider infrastructure at obscene gross margins wander into the consumer electronics space? Why go from a market in which you are the 800-pound gorilla into one in which your are a 90-pound weakling?

Because it looks sexier.

Steve Jobs can stand on a stage in front of adoring audiences and hold his latest tour de force in the palm of his hand. Poor John Chambers has to point at geeky slides of CRS-1 routers. Not hard to see who is going to draw a bigger crowd at the after-conference cocktail party. Or, at least, the kind of crowd we all dream about.

Almost reminds me of the late 90s when Starbucks CEO Howard Schultz wanted to become a dot com company. The web was sexy; brewing coffee was not. Fortunately for Starbucks shareholders he realized the error of his ways and corrected course.

Making money is whatGÇÖs sexy. Cisco has done a fine job of this and should stick to its knitting.

Pete Baldwin 12/5/2012 | 3:16:19 PM
re: Cisco's Consumer Branding Crisis >If CSCO can enable that transition, or help to define it, demand will take care of itself.

Maybe that's what they're counting on ... but you're right, Cisco has to get known for that kind of role first, and that means convincing a whole different sector of industry.

On the plus side, maybe people will finally stop confusing Cisco with Sysco, the restaurant suppliers.
Pete Baldwin 12/5/2012 | 3:16:17 PM
re: Cisco's Consumer Branding Crisis The TiVo idea has come up a few times now, and it's certainly intriguing. TiVo would come relatively cheap.

But with Scientific-Atlanta and KiSS already, I'm not sure Cisco would be shopping for anything like that.
Pete Baldwin 12/5/2012 | 3:16:17 PM
re: Cisco's Consumer Branding Crisis As chips_ahoy notes, it certainly could end up being a sinkhole, but I think Cisco is going all-in here. You don't build an entire major league ballpark just to advertise to the IT sector.

I don't think Cisco is doing this just for the sexiness; Cisco very much needs a new growth vector for the long term. They're preparing for the day when routers, even big ones, become commodity -- at least, that's how I've interpreted Chambers' talks during the last couple of years. Digital signage and TelePresence will take them only so far.

But yes, it's true Cisco lacks leverage with the standards bodies. Richard Doherty notes that Cisco and SA had zero papers submitted for the IEEE consumer electronics confernece (the one held in Vegas right after CES); as he notes, that's hardly a way to get taken seriously by the engineers in this space.

I'm not trying to defend Cisco here; the whole thing could turn out to be a nightmare. Sure is fun to cover, though.
JohnMosesBrowning 12/5/2012 | 3:16:17 PM
re: Cisco's Consumer Branding Crisis If Cisco wants to develop a truly revolutionary set-top box, they should just buy TiVo.
roadie_biker 12/5/2012 | 3:16:16 PM
re: Cisco's Consumer Branding Crisis Consumer market is not easy. Its crowded space.

- changing the logo is probably the first baby step
- most folks will not put a blue Linksys Box or a blue-green colored box in their living room.
- Cisco is known for rack space in data centers, not in Living rooms.
- usabaility is another huge deterrent for Cisco products. Most such products are menat for geeks. Cisco ROuters and Switches need a CCIE who knows IOS in and out. Imagine doing this for home networks and home electronics -

Even a Linksys box gets hard to configure if one gets into details like access restrictions and security etc.

Driving via a remote with simple controls and a nice colored box that is easy to use, pleasing to the eye and fits in with the living room furniture is an extremely hard play. Few companies have perfected this.

It's a hard battle.
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