With the dropping of its popular Flip line of personal video cameras and the rumoured sale of its legacy Linksys business of consumer routers and home entertainment connectivity solutions, Cisco Systems (NASDAQ: CSCO) seems determined to leave high-visibility consumer-facing businesses behind and beat a hasty retreat back into the enterprise data centre.
It was just a few short years ago that Cisco was high profile at the Consumer Electronics show and the “Connected Home” was a key part of its future vision.
Powerful home networks streaming media throughout the house, cameras with built-in network access to wirelessly upload video to the web –it all boiled down to more network traffic requiring more network capacity, good for Cisco’s core network equipment business.
Recently, though, Cisco seems to be abandoning this strategy and is shedding itself of “non-strategic” business it feels aren’t core to the company’s networking business. First to go was the popular Flip line of consumer handheld digital video cameras that Cisco bought from Pure Digital for US$590 million just two years ago. They created a new product category and were praised for their simplicity, but Cisco is now shutting down the business without even trying to find a buyer.
With company CEO John Chambers promising a laser-focus on Cisco’s core enterprise networking business to help get the books in order, rumours abound that the Linksys business could also be on the block, and maybe even its WebEx collaboration platform. The company denies either business is being shopped, but Chambers’ focus will need to be realized tangibly somehow.
There are many arguments against a retreat into the enterprise data centre, but here’s a key one: brand awareness. Flip saw Cisco reach audiences that have never heard of the company before, and gave it cachet with consumers through its marketing campaign with sports stars, musicians and other celebrities. Through Linksys (being rebranded with the Cisco name), a leader in the home networking space, Cisco gets instant brand awareness and credibility with consumers and with the small business owners that buy through retail today, but will graduate up to the channel and up the value chain as their business grows.
Increasingly, enterprise buying decisions are influenced by brand awareness and the preferences of staff and executives, which are largely formed through their experience with consumer technology. With its consumer business Cisco has an edge over competitors in converting new customers to Cisco; it would be a mistake to throw it away.
Follow Jeff Jedras on Twitter: @JeffJedrasCDN.
