The first shoe has dropped at Cisco, with the company announcing today that it's discontinuing production of the Flip camera, as part of a larger restructuring of Cisco's much-criticized Consumer product business.
Though the Flip announcement is the big headline of the day, probably the most relevant portion of the announcement for enterprises has to do with umi, Cisco's home-telepresence offering; the restructuring calls for the company to:
Integrate Cisco umi into the company's Business TelePresence product line and operate through an enterprise and service provider go-to-market model, consistent with existing business TelePresence efforts.
This is in keeping with the purpose of the restructuring, which Cisco described as being to "realign the remaining consumer business [i.e., non-Flip] to support four of its five key company priorities--core routing, switching and services; collaboration; architectures; and video."
The release doesn't specify whether umi will continue to be available at Best Buy, but emphasizing enterprise and service provider sales channels would seem to suggest that Cisco is backing away from umi as a pure-play consumer, call-to-Grandma kind of service. Instead, it seems more likely to be driving a model of umi for teleworkers and a smaller niche of home users.
In an email exchange with me this morning, Andrew Davis, Senior Analyst at Wainhouse Research, had this to say about umi:
Integration of umi with the "existing telepresence efforts" holds the promise of fixing a few of the umi's fundamental flaws while giving enterprises a system they can deploy in remote and home offices. The danger here of course is cannibalization and threatening the Tandberg business for which Cisco just paid $3.4B. A videoconferencing system priced in the $500 range also presents some serious channel and tech support challenges.
Different models of home telepresence are emerging. The Cisco model for delivering home telepresence--a dedicated appliance--is also used by Logitech with its Revue, a GoogleTV box. The major competing vision comes from Microsoft, which is tying home telepresence to the Kinect/Xbox gaming platform. Skype is also in the market, but requires a television set that comes with Skype integration.
It's still up in the air whether any of these will succeed; it seems to me that Microsoft has a natural edge here, in that they're already in many consumers' homes with Xbox--and, integrating services like streaming Netflix content with game consoles is becoming a common enough scenario for the carriers to be worried enough about it to confront Netflix's carriers over traffic blocking issues.
Andrew Davis points out that the Flip acquisition never really was going to be a great driver for the overriding Cisco goal of loading up IP networks (built on Cisco switches and routers). Cisco's pushing the idea that "video is the new voice," but that position almost necessarily implies that video will flow freely on a public or enterprise network--whereas Flip was a standalone, single-purpose camera with no wireless connectivity. Sure, you could plug it into a computer's USB port and send video around the network, but that model just can't compare to the immediacy of a smartphone.
As Andrew noted:
While Cisco has identified video as a key driver of future network bandwidth consumption, acquiring the Flip business was a move that really never made any sense for Cisco. Owning the consumer endpoint that creates store-and-forward video clips has only a remote connection to driving network traffic. The Flip business takes (or took) Cisco completely astray from its focus and placed the company in a totally different competitive space.
Andrew Davis also offered this overall assessment of Cisco's video strategy:
Cisco and John Chambers have been talking about "video" for several years and the importance of video to the company's future. But in fact the company’s moves in video have been diverse and uncoordinated, unfocused even.
1) $5B acquisition of scientific Atlanta and the cable set top box business
2) Internal developments focused on proprietary telepresence systems
3) $0.6B acquisition of Flip video maker Pure Digital Technologies
4) $3.4B acquisition of Tandberg to solve an interoperability story and fill in product line holes
5) Cisco umiWhat do all these have in common? What they have in common is that they have nothing in common (other than they are video related).
1) $5B acquisition of scientific Atlanta and the cable set top box business
2) Internal developments focused on proprietary telepresence systems
3) $0.6B acquisition of Flip video maker Pure Digital Technologies
4) $3.4B acquisition of Tandberg to solve an interoperability story and fill in product line holes
5) Cisco umi
What do all these have in common? What they have in common is that they have nothing in common (other than they are video related).
And on the overall announcement, Davis wrote:
Whatever happened to the Scientific Atlanta business acquired in February 2006 by Cisco for $5B? Between Scientific Atlanta and Linksys, Cisco could really dominate the home networking market with leading edge technology. Indeed, the press announcement today talks about refocusing Cisco's home networking business (is this just Linksys?) for greater profitability and connection to the company's core network infrastructure--an overdue move, but lacking in details. Between Scientific Atlanta and its huge customer base of cable MSOs, Linksys home routing technologies, and Cisco's videoconferencing expertise, Cisco could really light up home networking and home telepresence markets with innovative, integrated, and high performance/low cost products. That is the potential, so far unrealized.
Today's restructuring move will cost 550 jobs at Cisco.
It's been known that major changes were coming at Cisco ever since CEO John Chambers sent a employees a memo to that effect last week. Consumer products were widely expected to be a major target, since that division was down 15% in the latest quarter.
