The VAR Guy

Generally speaking, Cisco Systems isn’t a name that’s synonymous with consumer products. Even dedicated Flip users might not know that the video camera comes from the big, ubiquitous networking company. Nevertheless, Cisco has a growing portfolio of consumer products — including Flip, Umi TelePresence, and the LinkSys/Valet line home networking solutions. But Morningstar, the investment research firm, recently called on Cisco to exit certain consumer electronics niches in order to refocus on the enterprise market. Should Cisco heed Morningstar’s advice?

The questions started after Cisco announced a less-than-stellar financial outlook in early February 2011. Around the same time, Cisco disclosed that Jonathan Kaplan — leader of the company’s consumer business — was leaving the company. Soon after, the Motley Fool — a very popular financial blog — and Reuters suggested it was time for Cisco to rethink or exit certain consumer businesses. The Reuters and Motley Fool reports leaned heavily on analysis from Morningstar, the financial advisement firm. In Cisco’s most recent quarter, orders for consumer products fell 15 percent compared to the same period last year, Reuters reported.

It’s tricky for me to make recommendations since I don’t have access to profit/loss statements for Cisco’s consumer electronic lines. Nor have I seen specific margin information. But I do have some strong opinions about Cisco’s consumer efforts.

Flip: Time for Innovations

First, let’s look at what’s apparently successful: The Flip Camera. This device, which The VAR Guy swears by, is a useful and powerful little tool. It shoots HD video, it’s easy to use and it’s got a solid base of users. Problem is: It’s not doing anything new. Despite minor upgrades, there hasn’t been anything ‘new’ or revolutionary about the Flip camera lately. (Cisco announced plans to acquire Flip and parent Pure Digital in March 2009.)

One thing a company shouldn’t do is let a premier consumer product get stale. That’s a recipe for disaster. Perhaps Cisco should spin off Flip and its sister consumer products so that they sink or swim on their own. Flip could be the iPod of this new spin-off, so to speak. Innovate, streamline the device, upgrade the internals, introduce wireless connectivity for video transfer.

Our own editorial director, Joe Panettieri, would love the option for easy external microphone support. Did such capabilities ever ship as part of the so-called Designed for Flip and FlipPort initiatives? Flip users would welcome an update.

Umi Consumer TelePresence

Second, Cisco needs to adjust its Cisco Umi strategy. Great idea, poor execution so far. In the consumer market, I suggest dropping the monthly fee and drop the price of the device. A monthly fee for any video collaboration product is an automatic turn off for consumers because basic Skype video is already free.

Pro-sumers can definitely get on board with HD video chat — I know I could — but to proliferate that device, it’s got to be easily accessible. Cisco cut Umi prices in early March, but the current $500 price tag is lofty, and that’s not even a ‘family pack’ with two devices. It’s $500 just for one (plus that monthly service provider fee.).

I suggest designing a Umi offering that comes in at $150 for a dual-pack. Laptops are coming standard with HD video cameras these days, so I think Cisco can find a way to develop Umi technology at a lower price point. Get Umi solutions into as many hands as possible and reap the rewards of positive press. Then build on top of that.

If my suggested price points aren’t financially possible, then my peer Joe Panettieri has another idea: Reposition existing Umi offerings and their monthly fee as a managed service for VARs and MSPs to promote into the SMB market. Unlike some consumers, SMBs are more willing to pay monthly service provider fees for IT. (More thoughts from Panettieri later.)

LinkSys Branding

Lastly, let’s drop the LinkSys / Cisco co-branding effort. It’s confusing. In my personal opinion, we don’t need more consumer wireless routers in the market. It’s flooded to the brim and there are more robust solutions than the LinkSys / Cisco Valet routers. Plus, the UFO-shaped router design is counter-intuitive for those who take home network setups seriously. It’s not stackable and it will only sit horizontally.

(For the record, Panettieri thinks Cisco should hold onto LinkSys since it provides a natural stepping stone from the consumer/SOHO market into the SMB space.)

Consumer Video As a Standalone Company?

I have a slightly different suggestion. I think Cisco should spin off a consumer electronics company that focuses on getting video anywhere and everywhere. Cisco could build out its own video sharing cloud that’s compatible with YouTube / Facebook, etc… and integrate the Flip with the Umi. It’s a grand idea, even if it’s a bit naive.

Right now, big-time video collaboration seems relegated to the ‘big timers’ only, but consumers could easily get on board if the on-ramp was presented to them.

Ultimately, Cisco’s consumer electronics efforts need to focus more on competing with Skype and Apple’s FaceTime. The best way to do that, I personally believe, is for Cisco to spin off its consumer electronics business.

By David Courbanou with additional insights from Joe Panettieri. Sign up for The VAR Guy’s Weekly Newsletter, Webcasts and Resource Center. Follow The VAR Guy via RSS, Facebook and Twitter. Follow experts at VARtweet. Read The VAR Guy’s editorial disclosures here.

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