Why Cisco’s Flip axing could signal Cius support

In an effort to go back to its enterprise and networking roots, Cisco Systems Inc. has discontinued its Flip Camera and axed 550 employees working on the technology in its consumer division.

The networking giant, which acquired the Flip business in early 2009 for US$590 million, said it will now refocus its home networking business and integrate its Umi consumer products into the larger Business TelePresence line. The company also said it will stay committed to its main priorities, including core routing, switching and services, collaboration, architectures and video.

Cisco spokesperson Karen Tillman said that while some aspects of the company’s consumer business will still move forward — mainly its Linksys products — the motivation behind the move is to bring all of its technologies back to the enterprise and service provider business.

“In general for our enterprise IT customers, this is about Cisco being incredibly focused on our core competencies and our network-centric platform,” she said, adding that Cisco will sell through its inventory of Flip Cameras and unveil a support plan for existing customers in the near future.

Tillman also confirmed the company will reduce its workforce by 550 employees in the fourth quarter of fiscal 2011. “The 550 are specific to Flip,” she added.

Cisco did not reveal how killing off the Flip would impact its upcoming Cisco Cius tablet release, which is expected to hit the market in the coming months and was made available to channel partners on March 31.
Brad Shimmin, a principal analyst for collaboration platforms at Current Analysis Inc., said he was a fan of the Flip and hopes to see the technology transitioned to Cisco’s enterprise focused products.

But while the arrival of HD-capturing smart phones such as the iPhone signaled the “death knell” for the Flip, he added, Cisco’s enterprise video and collaboration business might actually be better off without the device.

“This lets them put more of an emphasis on the importance of video in the enterprise and break down the border between the consumer and professional personas that we all have,” Shimmin said. “We don’t need to have a consumer-only device and an enterprise-only device. This could be seen as a reflection of that.”

Shimmin said Cisco would find little use for the Flip when selling video collaboration technology to enterprises because the Cius is intended to fulfill the personal and professional needs of the enterprise worker.

“Cisco is better off focusing on devices capable of doing more than one thing,” he added.

Van Baker, a research vice-president of retail and consumer technologies at Gartner Research Inc., said he was not surprised by the move and actually raised this possibility after Cisco acquired Flip.

“Cisco just does not know how to effectively participate in the consumer market,” he said. “There were many possibilities with the Flip line but Cisco didn’t pursue any of them. One of the easiest would have been to bring a connected camera to market but even with their Wi-Fi expertise they failed to do this.

Andre Kindness, a senior analyst covering network operations and architecture at Forrester Research Inc., said the move was inevitable for Cisco since Flip customers were being gobbled up by other devices.

“Cisco does not have the pedigree or management depth to handle a consumer business,” he said. “By having management teams consist of high end services, consumer devices, and business products sitting on the same board, each bringing their vision on what works, the business unit’s strategies were muddied which has damaged most of the units within Cisco.”

He added that while everyone understood Cisco’s rational to buy Flip and push video, the company’s ventures into Telepresence and Vandburg provide those aspects and are better aligned with Cisco’s core business.

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