What the Flip?

The demise of Cisco’s Flip device marks the end of the network vendor’s consumer dalliance

Tags: CamcorderCiena Networks (www.ciena.com/)Cisco Systems Incorporated
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What the Flip? Cisco Flip (Getty Images)
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By  Daniel Shane Published  April 14, 2011

It is fair to say that Cisco's 2009 acquisition of Pure Digital Technologies raised a few eyebrows among investors and industry analysts.

The US network vendor's decision to splash out $590 million on the Flip video camera maker, just as the global economic recession was lolling into gear, was an unorthodox move for a company that derives the lion's share of its revenue from selling to carriers and businesses.

The low-priced, consumer-focused Flip camera's key selling point was its USB connectivity, allowing budding film-makers to quickly transfer and edit home movies from the desktop. Among Cisco's more prosaic core product line, namely routers and switches, Flip was an obvious white elephant.

It came as little surprise then in April 2011 when the company finally decided bring down the curtains and call it a wrap on Flip. The decision to discontinue Flip will see Cisco shed approximately 550 jobs.

Analysts' and other commentators' attempts at elucidating on Flip's failure have been akin to shooting fish in a barrel. Bo Gowan, of network solutions vendor Ciena, claims Flip flopped due to its lack of Internet connectivity, and the proliferation of high end smartphones.

"That wasn't an issue when the Flip was introduced in 2007," he wrote on Ciena's corporate blog. "But as mobile devices like the iPhone began integrating video, and then HD video, into their bundle of functionality, part of the ‘fun' of having a low-end video camera was being able to immediately share it with friends and family via MMS, email, or by uploading it to YouTube and Facebook."

The end of Flip arguably marks the end of Cisco's foray into the consumer market. As part of a company shake-up in April, Cisco has also moved Umi, a high-definition consumer video conferencing product, into its enterprise TelePresence unit. Umi, unveiled just last year, came with a steep $599 price tag.

John Chambers, one of the tech sector's more earnest CEOs, was thoughtful in his assessment of Cisco's consumer experiment, and called on the vendor to refocus on the enterprise. "We have disappointed our investors and we have confused our employees.  Bottom line, we have lost some of the credibility that is foundational to Cisco's success - and we must earn it back. Our market is in transition, and our company is in transition. And the time is right to define this transition for ourselves and our industry.  I understand this.  It's time for focus."

Others were more succinct in their analysis: "Cisco has realised that's a crappy business," Sean Conner, an analyst at Nuveen Asset Management, told Bloomberg. "There are no synergies with the rest of their business."

Cisco's decision to refocus on its core enterprise market comes during a decisive phase of its history, as its faces rising competition from smaller rival Juniper Networks and Chinese heavyweight Huawei. Furthermore, Cisco will doubtlessly be peering over its shoulder at IT giant Hewlett-Packard's widening focus on the network sector.

It is just as well then that another of Cisco's recent product strategies is performing excellently. Its Unified Computing System, an integrated data centre stack combining networking, storage and virtualisation, had a cracking fourth quarter 2010, posting sales growth of more than 500%.

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