Cisco to close Flip video-camera business

By Jon Swartz, USA TODAY

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SAN FRANCISCO — Cisco Systems decision to shutter its Flip video-camera business not only signals the pitfalls of trying to make products for corporations and consumers, but the growing influence of smartphones.

The Silicon Valley company said it expects its consumer business shake-up will result in the loss of 550 jobs, or less than 1% of its 73,000-person workforce. After careful evaluation, we believe the best course of action is to shut down our Flip business, Cisco spokeswoman Karen Tillman says.

The computer-networking giants about-face comes after several quarters of disappointing results and challenges in its core businesses. Analysts such as Rob Enderle say the company has been trying to do too many different things.

CEO John Chambers acknowledged the criticism last week, when he vowed in a memo to employees to take bold steps to narrow the companys focus.

On Tuesday, Cisco also said it will fold Umi a $499 box that turns a high-definition TV into a big videophone into its corporate videoconferencing business, and will sell it through corporate channels and Internet service providers. It cut the price of the box in March, along with the monthly service fee, which went from $24.95 per month to $99 per year, to spur sales.

Ciscos Home Networking business, which makes Wi-Fi routers, will be refocused for greater profitability, but Cisco will still sell routers in stores.

Cisco bought Flip maker Pure Digital Technologies for $590 million in 2009, just two years after the San Francisco company made its first camera. It quickly became a top seller because of its ease of useand a USB connector that let users connect the camera directly to a computer.

Cisco appears to see no point in selling the business. It will continue to support the sharing of Flip videos online.

Why dont they just sell it now? analyst Greg Sterling says. Unless there is some tax or accounting trick going on, someone needs to give it new life and save jobs. Flip is still a viable product.

The death of the Flip product line not only underlines the difficulty of an enterprise company diving into the consumer market, but highlights the power of smartphones.

Its Business 101: You cant be everything to everyone, Enderle says. There is a reason why Apple failed at servers and Microsoft has had problems with products like the Zune. Bridging consumer products to enterprise products is very difficult, and currently, no one is doing it well.

Flip also suffered at the hands of smartphones such as iPhone and Android, that let consumers record and stream video directly from their phones, says Sharon Wienbar, a venture capitalist who has invested in mobile technology.

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