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Cisco Flips on Consumer Business

Phil Harvey
4/12/2011

Cisco made some definitive moves Tuesday to help out its stagnant stock and bloated management structure by announcing the closure of its Flip video camera business, the "refocusing" of its home networking division and the integration of its "Umi" consumer video product into its Business TelePresence line.

Additionally, Cisco said it will figure out other uses for Eos -- its media hosting business -- within the company.

Cisco says these moves will result 550 job losses and charges against earnings that are "not expected to exceed $300 million during the third and fourth quarters of fiscal 2011."

While these moves aren't exactly a surprise, they do collectively show just how far flung Cisco has become over the years, drifting from its core infrastructure businesses to more consumer gadget businesses and services, where the likes of Sony Corp. (NYSE: SNE), Apple Inc. (Nasdaq: AAPL), D-Link Systems Inc. , Pace Micro Technology and others already have solid footing. We'll have more reporting and analysis on these moves over the next several days.

For more



— Phil Harvey, Editor-in-Chief, Light Reading

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Pete Baldwin
Pete Baldwin
12/5/2012 | 5:07:54 PM
re: Cisco Flips on Consumer Business


That was quick.


I know we all ragged on Flip, but it seems harsh to shut it down completely, considering it's got some brand identity. (Yes, we're never happy over here.) Then again, it's probably not something that'd be easy to sell off -- anyone who wants to be in the camera business is there already.


As for Umi, it's now going to be sold via service providers and/or to enterprises, rather than sold to you and me via Best Buy et.al.  It was a nice try, and we all knew Cisco was going to eventually try home telepresence, but it just came across as too pointlessly high-end.

Pete Baldwin
Pete Baldwin
12/5/2012 | 5:07:53 PM
re: Cisco Flips on Consumer Business


True - we went over that before, didn't we?  (A: Yes, we did: http://www.lightreading.com/document.asp?doc_id=204627&piddl_msgid=337154#msg_337154)


Flip seemed big enough that someone should be able to make use of it, and non-core enough that Cisco wouldn't be stung in terms of market share or anything like that.  It really didn't occur to me that they'd shut it down.  Guess I should have known.

Rush21120
Rush21120
12/5/2012 | 5:07:53 PM
re: Cisco Flips on Consumer Business


It's more of a cultural thing with Cisco.  I do agree, when there is money on the table you take it but Cisco is still flush with cash and generally there are significant paper money (stock/options) and tax implications at play.

Rush21120
Rush21120
12/5/2012 | 5:07:53 PM
re: Cisco Flips on Consumer Business


Whens the last time you've heard Cisco sell a BU/product?   Typically they buy market share and never give/sell it - even when the close products/BU's down.

DCITDave
DCITDave
12/5/2012 | 5:07:52 PM
re: Cisco Flips on Consumer Business


Shutting Flip down does make sense. In a way, Flip became a dead-end product once the iPhone 4 (w/FaceTime) shipped. Why buy a Flip when you can get a high-res, connected experience in a device you already carry everywhere?


Also, what was Flip's second act? A non-networked product inside "the human network"? Really shows just how infatuated Cisco was with the consumer electronics craze.


 


 

scottdTBR
scottdTBR
12/5/2012 | 5:07:52 PM
re: Cisco Flips on Consumer Business


I remember reading not long after the acquisition that they were going to leverage the video assets/expertise from Flip for other products (like umi). I agree that Flip was destined for the scrapheap regardless of Cisco's financial performance - their current troubles served as just a good reason to do so. Kind of like when a company uses a disappointing quarter to lay off the underperforming employees.

DCITDave
DCITDave
12/5/2012 | 5:07:51 PM
re: Cisco Flips on Consumer Business


That could be. Perhaps the whole exercise was an elaborate demand-creation tactic :)


 


"Look at how much video is on the network! Time to upgrade those routers."

yarn
yarn
12/5/2012 | 5:07:45 PM
re: Cisco Flips on Consumer Business


Why would anyone still be carrying cameras like a Flip when every smartphone is already equipped with a high resolution camera? There's an app for that now!


Pocket space comes at a premiun, unless you're wearing Dockers gadgetpants.

Stevery
Stevery
12/5/2012 | 5:07:45 PM
re: Cisco Flips on Consumer Business


> but it seems harsh to shut it down completely, considering it's got some brand identity.


That was probably not lost on JC and the csco brass.  I think it speaks to just how bad the red ink was flowing, and that you'd essentially have to pay somebody in excess of the shutdown cost in order to take it off your hands.

crazy4geek
crazy4geek
12/5/2012 | 5:05:14 PM
re: Cisco Flips on Consumer Business


While I most certainly believe now as I did when acquired that Flip was not in Cisco's wheelhouse.  The argument was that it would drive traffic by flooding the net with video- while I don't believe or disbelieve that, the device would have been better served for this with net capabilities.  That said, Flip was still a profitable product, albeit drastically lower margins than Cisco has become accustomed.  Perhaps Cisco did, but it doesn't appear that they made an attempt to sell off Flip.  I don't presume to know the value of Flip. but I would have liked to see it sold off rather than taking a $300M charge back.

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