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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tsat 12/5/2012 | 3:16:09 PM
re: Cisco's Consumer Branding Crisis That rack still needs sexy software. Apple has that aspect nailed. Cisco is still a long ways off. Unless it buys Tivo.

If you take the user interface out of the hidden rack you speak of, then it is still just the equivelent of a linksys router, IMHO.

prs6str 12/5/2012 | 3:16:12 PM
re: Cisco's Consumer Branding Crisis How do you know the margins will be so bad? I've heard the low-end product at Cisco produces some of the best margins and they don't seem to be upset with the linksys effects on their overall margin.

I also don't see how intelligent home networking for Cisco is analogous to your starbucks example. They are already successful there, and it's not even a stretch for them technically. It's more a business model/public awareness issue. But I won't be surprised if they succeed...it's just a matter of the level of success.

Cisco has better vision than Apple, Apple has cooler products. But, when the box sits in the closet or quietly and efficiently does it's task, I would guess folks won't want to pay for the Apple panache. I personally want just a TV in view (or equivalent functionality) with decent speakers. Everything else is a supporting player and can be a black box in a closet rack. The stack of visible gear makes no sense in the future. In this case, Cisco could own the rack because you just want it to work.
prs6str 12/5/2012 | 3:16:12 PM
re: Cisco's Consumer Branding Crisis this post deserves comment...

MS - Saturation of PC software? I suspect there will be additional PC software developed in the future and Microsoft will develop a lot of it. Whether they blow it remains to be seen, but the role of the PC may retreat to the office for the home. As an owner of their PC based home solution (MCE2005), I'm now a strong believer in the networked appliance approach. I've had to troubleshoot and rebuild my MCE PC too often for it to be a success - and it is a dedicated pre-packaged version. In essence, a PC is like the new mainframe. It's time to break it up into lots of specialized tiny pieces and attach them to the network. MS will not run on most of them.

Cisco - The market for routing and switching will shrink while most of the world moves to delivering all services such as HDTV to the home via IP...hmmm...care to take bets? Cisco will win the home network and battle for the intelligence portion. I don't see them ever seriously producing TVs, stereos, speakers, etc. That market they'll concede to traditional CE companies to allow for limitless choice and competition for the consumer while ensuring they can all work together over their infrastructure - just like they did in the enterprise. This will allow partnering with key companies like Sony over time (once Sony figures out they can't win Cisco's plumbing part). Cisco needs to quickly build their integration partner strategy so that all contractors spec Cisco stuff in home network installs...then build recognition in the consumer space that Cisco = quality and interoperability so consumers ask for them by name or chose them on at the store. Then they will be free to pick their favorite brand of network enabled TV, etc.

Optical systems manufacturers? Optical is mostly hw - until there is extensive sw involved, it will continue to commoditize faster than anything MS or Cisco does. And, for the foreseeable future, Optical will simply be used to connect Cisco devices because IP won, not raw circuit bandwidth nor circuit based architectures.

Google has a great future, but as far as I can tell, they have no play in the intelligent home network plumbing that Cisco should easily dominate. Just as Cisco grew from owning corporate networks, they can work from their home network base. I think MS is Cisco's primary competition, but I wouldn't be surprised to see Google unseat MS going forward. It's not clear who will compete with Cisco for the plumbing part. I see an MS/Cisco, Google/Cisco or even Cisco/Cisco future. In any case Cisco will participate.

Just my opinion obviously
roadie_biker 12/5/2012 | 3:16:13 PM
re: Cisco's Consumer Branding Crisis If all these companies are going to fail and remain stagnant, then do you anticipate companies like EMC, NetApp etc to gain?

Video on Demand and IPTV, TiVo on Demand etc is sure to create a surge in demand for massive amounts of media storage.

opticalwatcher 12/5/2012 | 3:16:13 PM
re: Cisco's Consumer Branding Crisis "I think Microsoft has failed in their stragety to use an Xbox as a set-top box....Microsoft does not really have a good track record with cutting-edge new technologies like that."

If you are old enough to remember--that's exactly what they said about Windows 2.0.

It's the partnership with ATT that does it--ATT can make it 'the' console for its IPTV.
tsat 12/5/2012 | 3:16:14 PM
re: Cisco's Consumer Branding Crisis
I think Microsoft has failed in their stragety to use an Xbox as a set-top box. they could have done it with the original Xbox, all the technology was in there. They talked about it, but it never happened. Microsoft does not really have a good track record with cutting-edge new technologies like that.

Maybe Cisco could pull it off? But Cisco is not already in your living room.

burn0050 12/5/2012 | 3:16:14 PM
re: Cisco's Consumer Branding Crisis Craig,
I think you're missing the point. Tivo isn't a set top box - it's attached to a set top box. It's a DVR - and say what you want, while Motorola and SA claim to have DVR's - they're junk.

Tivo is a darling in the consumer market - people use the name synonymously with recording. How many times have you heard on TV "I Tivo'ed it.." It has huge consumer presence.

It's the software that makes Tivo special, and the crap they have in the current boxes (I curse my Motorola DVR on a nightly basis) just doesn't compare to Tivo (I still have my beloved Tivo on my upstairs tv).

Cisco should buy Tivo and integrate the software into their SA boxes and crush the market.
edgesansonet 12/5/2012 | 3:16:14 PM
re: Cisco's Consumer Branding Crisis I think most posters missed the information overburdening scenario arising in the home convergence market. And the most convincing market leader in that niche is ...Google. Google will win finally..hands down.

And this is how it will play out in the next few years:
- Microsoft's core markets will remain stagnant or shrink due to saturation of pc software
- Cisco's core switching and routing markets will remain stagnant or shrink due to commoditization of switches and routers
- Carriers like AT&T will shrink in revenue due to steadily increasing call and video traffic over the Internet. AT&T's IPTV initiative will only succeed so far. Cable will be a big competitor too in the same markets.
- Content vendors will start broadcasting live over the internet as connectivity becomes ubiquitous and cheap and with huge available bandwidths.

The final winners will be the optical system manufacturers and Google followed by Yahoo. Live.com will remain an also-ran. Make no mistake this change is disruptive.
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.
opticalwatcher 12/5/2012 | 3:16:16 PM
re: Cisco's Consumer Branding Crisis Maybe they see the light.

If Microsoft can make the XBox into an IPTV set-top, then how is Cisco going to compete?

Both Microsoft and ATT are very familiar with the advantages of a monopoly--that they are working together is a little scary. By working with ATT, Microsoft can force one subsidized piece into your home, then everything else they own ties into this.

Think about why Microsoft got into the IPTV business in the first place. Remember Light Reading's first article about Microsoft entering the IPTV market years ago, and how most people were not taking them seriously? At the time I said that it was wrong to underestimate them. I'm saying it again now.

Just think about it: they put a large hard drive, and maybe even an HD-DVD into the XBox, and turn it into an IPTV box. It also allows downloadable movies over the internet, connection to your Windows PC and/or Windows home server for your pictures, music (think Zune), and other media. ATT offers it as their new console for all their IPTV deployments.

Microsoft, in one fell swoop (in ATTs territory), has just severely hurt or even wiped out:
Scientific Atlanta (Cisco)
Apple (Mac, Apple TV, and maybe eventually iPod)
Sony (PS3, Blu-Ray)
TiVo (and all the others)
Linux (just try tying this system to your Linux box)
All the other IPTV middleware vendors
All the IPTV telecom boxes that don't work with Microsoft

you name it.

I know that this is the third message when I've talked about this, so I'll stop now. I just don't think people understand just what is going on here.
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