Cisco's Flip business closes; 550 workers to be cut

Computerworld - Cisco Systems on Tuesday announced that it is killing its Flip portable video camera as part of a restructuring effort that includes exiting other consumer-oriented lines of business and reducing its headcount by 550 workers.

Flip Video UltraHD 8GB
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Consumer products have recently been a drain on Cisco, a $40 billion company that dominates the switching and routing world. Three years ago, Cisco executives had ambitious plans for video, including consumer video and the Flip camera, even though getting involved in a consumer market like that was considered an unusual move for an infrastructure maker.

Last week, Cisco CEO John Chambers told financial analysts that the company needs to cut expenses in half; he made that announcement three days after issuing a candid memo to Cisco's 73,000 employees about coming changes.

The moves announced this week represent steps in Chamber's plan to realign Cisco's strategy so that the company focuses on five key areas: core routing, switching and services; collaboration; IT architectures; video; and data center products.

In addition to exiting some consumer-oriented lines of business, Cisco will reorganize its operations so that its remaining consumer offerings will fall into one of the five priority areas -- though consumer lines won't be incorporated into the data center area. As a result of the moves announced this week, Cisco said in a statement that it will take a $300 million charge in its third and fourth quarters of fiscal 2011, with the 550 job reductions coming in the fourth quarter.

Cisco said FlipShare customers and partners will be supported under a transition plan, but it offered no details.

Cisco's Home Networking business will be refocused, according to the statement, "for greater profitability and connection to the company's core networking infrastructure." Products in that area will still be sold in retail channels.

Cisco's Umi home telepresence offerings will be integrated into its Business TelePresence line and will be sold through an enterprise and service provider approach, although the company didn't elaborate on how that would work. Cisco also didn't say whether it would continue to sell Umi consumer products.

Cisco said it would "assess" whether to integrate its Eos media solutions business or find other market opportunities for that business.

It's ironic that Cisco is killing the Flip video camera even though it has identified video as one of its five priorities; apparently that priority doesn't extend to the consumer side. "We are making key, targeted moves as we align operations in support of our network-centric platform strategy," Chambers said in the statement.

"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," Chamber said.

A year ago, Cisco was supporting and touting upgrades to the Flip line. Among other things, the company added HD capabilities to the camera and promoted it in ad campaigns on the Web. There were even rumors that Cisco planned to sell a Wi-Fi-ready Flip, but that hasn't happened and now it's unclear how much longer the company will continue to support the camera.

Cisco has taken steps to make its Umi home telepresence products more affordable, and it has promoted the systems in national TV ads, but analysts think the market for Umi products will be limited.

Matt Hamblen covers mobile and wireless, smartphones and other handhelds, and wireless networking for Computerworld. Follow Matt on Twitter at @matthamblen, or subscribe to Matt's RSS feed. His e-mail address is mhamblen@computerworld.com.

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