Bloomberg News is reporting this morning that Cisco will be shutting down its Flip video-camera unit, a move that will cut about 550 jobs. Cisco bought the business for $590 million in March 2009, as part of its expansion into consumer markets. That plan included the purchase of Wi-Fi router maker Linksys and cable TV equipment manufacturer Scientific Atlanta.
At the time of the acquisition, Ned Hooper, SVP of Cisco's Corporate Development and Consumer Groups, said "We share the same vision about how video can change the world...." What it couldn't do was generate the kind of returns Cisco's enterprise businesses made. Cisco's gross margin shrunk from 70 percent in 2003 to 64 percent in the last fiscal year; Cisco’s shares have lost 34 percent in the past year.
In March of this year, Jonathan Kaplan, SVP and general manager of Cisco's consumer products group left to "pursue other career opportunities"; Kaplan had been CEO of Flip maker Pure Digital when Cisco acquired the company in 2009.
The reorganization of the consumer group was not a surprise as Cisco CEO John Chambers wrote in an April 4 memo that he would be making several "targeted moves" to restore lost credibility and sharpen the company's focus. The company said it will realign its remaining consumer businesses to support its "priorities," including core routing, switching and services, collaboration, architectures and video.
Flip may be out, but Cisco appears to be redoubling their efforts in the businesses we all know them for.
