Editor’s Note: Welcome to our weekly feature, Analyst Angle. We’ve collected a group of the industry’s leading analysts to give their outlook on the hot topics in the wireless industry.
It was with great fanfare that Cisco Systems Inc. announced on Mar. 19, 2009, the expansion of its consumer business with the acquisition of Pure Digital, which produced the successful Flip mobile camcorder. It was with also great flourish that John Chambers, Cisco’s CEO, announced on April 12, 2011, that Cisco was discontinuing the Flip camcorder, and in the process writing off $590 million and laying off 550 people. How did such a success story just a few short years ago turn into an absolute disaster?
Consumers have readily accepted devices built to do one thing really well. Up until the introduction of the smartphone, the rule was: “Do one thing really well, focus on it, deliver it at the best price and keep innovating. You’ll have a hit product that will continue for years if not decades.” The cordless phone, TiVo and the point and shoot digital camera and digital SLR camera are good examples. In fact, early cell phones were just phones. You purchased a separate PDA to store your data.
It’s only been in the past couple of years that devices with integrated capabilities that include a phone, digital camera, high-definition camcorder, Web browser, GPS, accelerator and applications have been accepted.
Flip only took videos and that’s all it ever did. It focused on one feature and made it very simple: you turned it on, hit record and it worked. Flip had a built-in USB port so you could easily attach it to your computer and download videos. The video files could be read by any computer and easily uploaded to YouTube. It was reasonably priced. The future looked bright. I’m sure that sales were forecasted to top 100 million per year.
But, as the smartphone gained more features, especially the ability to record HD videos, it became a direct threat to the Flip. Why carry around a Flip when you could do the same thing with your smartphone? One reason was optics. Flip never improved on the optics (lens) so that it was better than the smartphone’s. If they improved the optics and zoom capability, then it would have competed with higher-end camcorders, which have large lenses and better video recording chips and had until recently very high prices. Over the past two years Flip got squeezed out on the low end by smartphones and falling prices of camcorders on the high end.
It’s been rumored that Cisco tried, but couldn’t find a buyer for the Flip product line. All prospective buyers, including a number of Asian volume manufacturers, could see the same trend that Cisco saw: in a couple more years, no one would be buying a separate low-end camcorder.
I’m sure you’ll ask, “If the Flip was disintermediated by the smartphone, why are point and shoot digital camera manufacturers still seeing sales growth with their devices?” At least for now, the small and light digital point and shoot cameras take better pictures than a smartphone. Point and shoot cameras have bigger lenses and have more space in which to provide greater optical zoom. Take a shot using a smartphone at a stadium in night lighting and it looks awful. A point and shoot camera can take a much clearer photo as well as produce an HD video. Once smartphone manufacturers are able to duplicate picture quality, then the point and shoot category is at risk for falling unit sales just like the Flip.
Chambers made a difficult but correct decision. He could have allowed the unit to flounder for another year or two. But, he decided to pull the plug before it became a bloodbath. In retrospect, he should have purchased Palm Inc. and its webOS as that market is growing quickly and will continue to grow for many years. Hewlett-Packard Co. will have some challenges, but the acquisition of webOS is already paying off; HP is utilizing it in all of its future printers.
Don’t throw away your Flip if you have one. Keep it. It may be worth more than you paid for it at some point as a museum piece. “Yes, I have a Flip. It’s right over here in my hall of dead products.” Flip: RIP.
J. Gerry Purdy, Ph.D. is Principal Analyst, Mobile & Wireless at MobileTrax L.L.C. As a nationally recognized industry authority, he focuses on monitoring and analyzing emerging trends, technologies and market behavior in the mobile computing and wireless data communications industry in North America. Dr. Purdy is an “edge of network” analyst looking at devices, applications and services as well as wireless connectivity to those devices.
