Cisco Retreats from Consumer Devices (Mostly)

| Apr 13, 2011 | Consumer Devices
| Analysts: Larry Hettick, Avi Greengart

Event Summary

April 12, 2011 – Cisco will exit aspects of its consumer businesses as it realigns its operations. As part of its plan, Cisco will:

• Close down its Flip business and support current FlipShare customers and partners with a transition plan.
• Refocus its Home Networking business. These 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.

Quick Take

Analytical Summary

• Current Perspective: Very negative on Cisco’s move to discontinue the Flip product line and discontinue umi sales in the consumer space, because while Cisco probably never should have had these products in the first place, the company’s action leaves it exiting the business and Cisco ceases to be competitive in this space. Questions remain how the Linksys and Scientific Atlanta businesses make any more sense for an enterprise network hardware vendor than Pure Digital (Flip’s original parent company) or umi.

• Vendor Importance: Moderate overall to Cisco as its Flip line was a tiny percentage of the company’s overall portfolio and umi products hardly sold at all. Still, nearly a billion dollars wasted on a foray into camcorders is not a trivial amount of money, not to mention the money Cisco spent to position the company as a consumer brand.

• Market Impact: Low on personal connected devices because the Flip line was stagnant – it never gained even basic WiFi connectivity, while the rise of HD-capable smartphones and digital cameras have effectively capped the growth of the market for simple camcorders. However, Flip’s demise should give the camcorder divisions at Kodak and Sony much stronger 2011 holiday sales. Cisco’s actions may have more impact in digital home devices. This is not because umi has been relegated to business use – umi was never remotely competitive – but because Cisco has decided to keep its Linksys and Scientific Atlanta businesses largely unchanged. With leading brands in the home router and STB businesses, Cisco will remain a formidable competitor in digital home devices for years to come.

CLIENTS ONLY

Current Perspective

Competitive Strengths and Weaknesses

Response & Recommendations

Buyer Actions

Analytical Perspective

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