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Cisco discontinues Flip camcorder after hefty purchase

By Catholic Online
April 13th, 2011
Catholic Online (www.catholic.org)

Cisco announced that it will stop making the Flip camera, a popular pocket-sized camcorder a few of years ago from a company called Pure Digital. Cisco says it is strategically realigning its business to focus on selling its core products.

LOS ANGELES, CA (Catholic Online) - "We are making key, targeted moves as we align operations in support of our network-centric platform strategy," Cisco 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 2009 for $590 million. It was not a large purchase by the company's standards as it spent a total of nearly $6 billion to acquire Tandberg and Starent Networks that same year.

Many experts along with fans of the Flip camcorder wonder why Cisco didn't try to sell the business unit, especially since the Flip products are considered market leaders.

According to NPD's Stephen Baker, "there is no compelling evidence that Flip was failing. It remains far and away the leading consumer video camera company."

"I'm very surprised that Cisco chose to simply shut down the product given what they paid for it," said Zeus Kerravala, an analyst for Yankee Group, who has followed Cisco for more than a decade. "But I'm not surprised that they got out of the consumer business."

Some see it as a sign that Cisco needed to do something drastic to show Wall Street that it was getting back on track. For over 20 years, Cisco has dominated its core markets of Internet Protocol routing and switching. It has provided networking equipment to almost every large company, government entity, broadband and telephone service provider and thousands of small and medium businesses around the globe.

In addition, unlike many other tech companies, Cisco has managed to weather dips in the economy and almost always emerges from recessions stronger than it did going into them.

But as Cisco moved into new markets, sales in its core businesses slowed and Cisco lost market share. While Cisco still dominates in the IP routing market, it has been more challenged in its Ethernet switching business, where it faces stiff competition from a slew of competitors, including Hewlett-Packard and Chinese manufacturers, such as Huawei.

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