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Cisco Flip-flops on consumer market plans

CEO Chambers had touted consumer theme just last year

April 12, 2011 05:28 PM ET

Computerworld - Cisco's exit from its Flip business and other consumer technologies, announced Tuesday, comes less than 16 months after CEO John Chambers proudly announced Cisco's ascendency into consumer electronics and video products at the Consumer Electronics show in Las Vegas.

"Who would have thought a decade ago that Cisco would be be here talking about consumer products and video?" Chambers asked an audience of reporters and analysts at the January 2010, event. "It is video that changes everything."

The juxtaposition of those remarks and the Flip decision speaks to how video might indeed "change everything" -- though clearly not enough to keep Cisco invested in consumer video lines such as Flip and Umi, the home telepresence system that Cisco will now draw into its business telepresence unit.

Cisco's newly narrowed priorities and the decision to drop some consumer lines means 550 fewer jobs at the networking giant. In February, it said sales of its consumer products were off 15%, while overall company profit was down 18%. A management shakeup later that month included the departure of the consumer products head, Jonathan Kaplan. He had arrived at Cisco in 2009 from Pure Digital, the maker of the Flip, which Cisco purchased for $590 million.

Chambers and Cisco executives in 2010 talked often about the potential for enormous growth in video traffic over private and public networks. Now, it appears as though Cisco will focus more on the network traffic and less on the consumer endpoints. A Cisco spokeswoman, Karen Tillman, said Tuesday that Cisco will sell future consumer products through service providers and business partners, not directly.

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In that 2010 CES demonstration, Chambers showed off the Umi in-home telepresence with his wife, Elaine, on the other end. Then, he showed a clip taken from his personal Flip video camera of a family vacation, including his wife rocketing down a zip line in a jungle in Costa Rica. It was a trip made for Chambers' 60th birthday, and he was proud to reveal personal details, partly to show that the value of video is about sharing experiences.

Consumers relate to video of family and friends because of "the experience, and not the technology," Chambers said then. He even pulled out a Flip camera and recorded video of the reporters in the audience. In subsequent appearances, Cisco executives talked about filming video blogs with the devices to keep their employees informed about their whereabouts.

John Gallant speaks with Matt Hamblen from Computerworld about Cisco's decision to kill its Flip video cameras and exit from the consumer devices market.

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.



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