What once seemed like a promising segment of the consumer
electronics market is now being brushed aside -- at least in the Cisco camp.
Just two years ago, coughed up nearly $600M to acquire Pure Digital, the maker
of the popular Flip video
While many questioned the need for Cisco, a
networks-oriented company, to invest in this hot consumer category (over two
million units were sold within the first two years), the company moved forward
and carried the Flip torch. Now, Cisco's spending spree is coming back to bite
it in the butt.
Cisco is closing down its Flip division, and will
restructure its other business operations. As a result, the company will take a
$300M charge and will fire 550 employees by the end of this year according
to the New York Times."We are making key, targeted moves as we align operations in support of our network-centric platform strategy," said John Chambers, Cisco chairman and CEO. "As we move forward, our consumer efforts will focus on how we help our enterprise and service provider customers optimize and expand their offerings for consumers, and help ensure the network's ability to deliver on those offerings."
So why is Cisco dumping its investment so soon? It all comes
down to convergence. You can't shake a stick without knocking a camera-equipped
phone out of someone's hand. On top of that, many of today's high-end
smartphones come with high quality image sensors that can capture
720p video footage.
With most tech-savvy individuals already carrying around a
small, powerful "video recorder" in their pockets 24-7, why would
they need to purchase a separate, larger dedicated device with similar
Similar digital convergence has happened on a lesser scale
with MP3 players, but one has to wonder while all of the smart folks over at
Cisco didn't see this one coming.