Feeling some serious buyer’s remorse, Cisco Systems Inc. today announced plans to give up its $590 million purchase of Pure Digital Technologies and eliminate its Flip business unit. Cisco also plans to ax 550 employees as part of an overall restructuring, which shows the exorbitantly priced purchase was clearly not worth the price tag.
Although Cisco plans to close the Flip business, it will continue to support Flipshare customers who upload and share videos to the Web. Instead of focusing on Flip, the firm plans to refocus its Home Networking business with plans to intertwine the sector with the company’s networking infrastructure. Part of this restructuring will mean moving Umi, Cisco’s consumer Telepresence, into the business Telepresence line with both enterprise and service provider go-to market model.
“We are making key, targeted moves as we align operations in support of our network-centric platform strategy,” CEO John Chambers said in a statement. “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.”
Cisco bought Pure Digital in March 2009, hoping to move itself into the consumer electronics realm and planned to tap into Pure’s strong consumer electronics presence mostly in the home networking sector. But the company’s home video conferencing product, Umi, failed to gain much momentum partly because of its high price tag. As part of the deal, Cisco also launched some consumer friendly home routers but did not see much cash from video camera sales, in particular the Flip.
That’s not to say Cisco did not try to revive Flip. The company launched a major advertising campaign partnering with various TV shows like the “Jersey Shore” to feature Flip cams and gain some buzz. The main barrier for Cisco, however, was the rise of smartphones with HD capabilities, which are more ubiquitous and have stronger sharing capabilities. While Flip was successful because of its niche in the market, sustainability was clearly not its strong point.
Only a few months ago, former Pure Digital CEO Jonathan Kaplan left Cisco, leaving the company unsure of the future direction of the Flip line of cameras and potentially marking a failed relationship between Cisco and Pure.
Earlier this month, Cisco CEO John Chambers announced his plans to completely reorganize the company with emphasis on five main areas: core routing, switching and services, collaboration, architectures and video. Although Chambers said Cisco would still focus on video, it seems he was not talking about Flip.
Flip failed to bring Cisco much cash in the past year, but there may still be a niche for handheld single-purpose video cams. Perhaps the dump will open the door for other single-purpose video cameras, preferably those without the pressure to perform for a major company.
