Cisco Dropkicks the Flip as it Refocuses on Business Market

Looking to shift its focus back to its core enterprise expertise, Cisco Systems has announced it is shuttering its Flip camcorder business and — for the most part — exiting the consumer market. The company is calling its move a “comprehensive plan to align its operations;” in other words, Cisco is scaling back to what it does best. What does that mean for its channel partners, its consumer products as a whole, and the industry at large? Read on for our unique perspective.

There have been rumblings of change coming from the halls of Cisco for a while now, as the company has been working to align its solutions around three core architectures — Borderless Networks, collaboration and data center services — and just recently revamped its Channel Partner Program to reflect the changes. In recent weeks CEO John Chambers acknowledged the company had “disappointed our investors and confused our employees” by its apparent lack of focus — something the company is now working hard to remedy.

Over the past month, we’ve offered up our thoughts about what Cisco should do with its consumer business. I, for one, thought Cisco should spin off its consumer line but keep Flip and make sure it didn’t get stale (make it the iPod of the video world, so to speak). I also thought Cisco should repackage Umi — Cisco’s home telepresence solution — with a lower price and no monthly subscription fee. Editorial Director Joe Panettieri, meanwhile, took a more channel-focused tack, believing Cisco should “reposition existing Umi offerings and their monthly fee as a managed service for VARs and MSPs to promote into the SMB market … [since] SMBs are more willing to pay monthly service provider fees for IT.”

But instead of spinning off the Flip, Cisco just buried it. Umi, meanwhile, is undergoing a market change. According to Cisco’s official press release, the company plans to:

• Close down its Flip business and support current FlipShare customers and partners with a transition plan;
• Refocus its 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 offerings still will be sold through retailers;
• Integrate Umi into its Business TelePresence product line and offer it through the same channels as its other TelePresence offerings; and
• Assess core video technology integration of its Eos media solutions business or other market opportunities for this business.

These actions leave Cisco to “focus on four of its five key company priorities,” which are core routing, switching and services, collaboration, architectures and video.

Cisco CEO John Chambers said these are all “targeted moves” to realign the company to be more “network-centric.” He also noted Cisco’s consumer business efforts will be officially diverted to help Cisco’s customers expand their own consumer offerings and ensure their network can support those needs — consistent with the aforementioned plans for Cisco’s Umi. I wouldn’t be surprised if soon we see Cisco Umi services offered through MSPs.

But even though some will cry over the loss of the Flip, Cisco’s consumer business shakedown likely is the best move for the networking giant. Despite spending $590 million to buy Flip from Pure Digital Technologies in 2009, Cisco’s place in the world isn’t about filling the web with video. It’s not known whether Cisco initially tried to sell or spin off the Flip business, but Bloomberg reports the restructuring will shed about 550 jobs — perhaps a sign that Cisco didn’t want to sell the Flip, or didn’t think it was worth trying to sell it.

The exact fate of Cisco’s other consumer-based technologies isn’t yet known, but the phrase “video platform in the home” in the press release is a major hint. It’s likely Cisco will continue its focus on offering high-end consumer networking products that provide streaming content around the home, such as its Linksys routers and Scientific-Atlanta set-top boxes — technologies that puts the company inline with both video and networking priorities.

All in all, it seems The VAR Guy’s early April 2011 predictions were on the mark. “The VAR Guy suggests Cisco should slim down before bulking back up. … It may be time for Cisco to exit certain markets.” We’ll keep our focus on the trimmed-down Cisco as the year rolls on, as well as which company picks up where Flip left off.

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