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Cisco Flip-flops on consumer market plans

Matt Hamblen | April 12, 2011
CEO Chambers had touted consumer theme just last year.

That personal value from video and the way it contributes to network traffic may still be viable, but Cisco, simply put, has not made money with that premise. Analysts noted that there are many Flip competitors on the market, including smartphones such as the iPhone 4 that actually provide live videoconferencing the Flip did not. Even Skype video from a home computer is seen as a viable alternative to a more expensive Umi home telepresence experience, analysts said.

Some have suggested that Umi might be sold to businesses for use by home telecommuters. Cisco's spokeswoman Tillman wouldn't comment on that possibility, but said Umi could be sold by service providers and other partners.

Cisco will still sell its home networking products, which includes the Linksys Wi-Fi router. As for why it's shuttering the Flip business instead of trying sell it off, Cisco offered little insight. Tillman said only that a thorough analysis showed closure to be the best solution.

Whether Cisco should have moved into consumer areas, or simply should have done a better job at it, remains open to debate.

"Cisco had a grandiose plan several years ago of not abandoning its traditional infrastructure and business roots but of becoming consumer-facing as well," said Jack Gold, an analyst at J. Gold Associates. "But Cisco really doesn't know how to be a consumer-facing company, since its always been in infrastructure selling routers and switches. Even the cable TV box they sell after purchasing Scientific Atlanta is sold to consumers through the cable companies, not directly by Cisco."

Gold said that consumer products also need constant upgrades Cisco could not keep up with. For the Flip to survive, it needed to be Wi-Fi enabled, as many predicted it would be. That would have helped Cisco sell its line of newer Wi-Fi routers working at faster 802.11n speeds inside of homes, Gold said.

"Flip was a niche product anyway, and everybody can shoot video on a cell phone now, or videoconference with it," Gold added. "People who want quality video didn't buy a Flip.

"The idea that Flip would increase video bandwidth on networks that Cisco sells into didn't work out," he said, estimating that Cisco only recouped 40% of its original Pure Digital purchase cost with Flip sales -- if that.

Repeating what many analysts have said for months -- something Chambers himself has echoed of late -- Gold said: "Cisco's lost focus and needs to refocus on key things and build on the markets [it is] already in."

 

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