Tuesday, April 12, 2011

Cisco Shutters Flip, Is Linksys Next To Go?

In a cost cutting restructuring effort Cisco Systems has announced that it is killing the company's Flip portable video camera and reducing its headcount by 550 workers. Considering the company has only owned Flip for a little over two years the announcement makes us wonder what might be next on the chopping block?

"We are making key, targeted moves as we align operations in support of our network-centric platform strategy," said John Chambers, Cisco chairman and CEO. "As we move forward, our consumer efforts will focus on how we help our enterprise and service provider customers optimize and expand their offerings for consumers, and help ensure the network's ability to deliver on those offerings."

As part of its plan, Cisco will:
  • Close down its Flip business and support current FlipShare customers and partners with a transition plan.
  • Refocus Cisco's Home Networking business for greater profitability and connection to the company's core networking infrastructure as the network expands into a video platform in the home. These industry-leading products will continue to be available through retail channels.
  • Integrate Cisco umi into the company's Business TelePresence product line and operate through an enterprise and service provider go-to-market model, consistent with existing business TelePresence efforts.
  • Assess core video technology integration of Cisco's Eos media solutions business or other market opportunities for this business.

Cisco has seen disappointing results in recent quarters leaving analysts calling on the company to do more to divest itself of disappointing consumer product lines and operations. Many analysts are suggesting that Cisco might want to look at cutting loose Scientific-Atlanta cable set-top boxes and Linksys home routers, too.

"We still want Cisco to take additional aggressive action and we wish Cisco would have exited the consumer video and home networking markets altogether," states Ittai Kidron of Oppenheimer & Co. in a report on Cisco's moves titled "And Now the Flop." "We also feel Cisco will need to restructure or exit its [Scientific-Atlanta] video systems business at some point given the unfavorable longer-term secular trends."

The buy out of Flip's parent company Pure Digital for $590 million in 2009 never really seemed to make much sense to me. Cisco is best known as a networking company and their jump into the consumer business market seemed best left at obtaining the Linksys product line. The shoot and share video camcorder market just didn't seem like a reasonable fit so it doesn't surprise me that it would be the first to go.

I've always been a big fan of the Linksys line and hope that the company doesn't decide to dump them. They've been busy updating the line with a recently introduced a line of E-Series routers so we can hope the product update mean the company is going to try to keep the brand alive.

1 comment:

  1. This wasn’t just a little mistake, it’s evidence of cluelessness. But in a way, it’s not all the fault of Cisco management. If they were allowed to distribute profits without dilution by taxes, maybe they wouldn’t feel so forced to maintain unsustainable growth, and would focus on things they understand, rather than delude themselves into believing they could extend their success in enterprise and carrier networking to consumer gadgets. To keep their current jobs, the management obviously feels obligated to grow the company faster than the markets they understand can grow. Maybe it’s not too late to cancel that tablet product.


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