Cisco shutters Flip business, takes consumer mulligan

Cisco on Tuesday announced that it will shutter some of its consumer businesses and realign what's left to support its core networking infrastructure businesses.

That means that the company will:

• Close down its popular Flip business, acquired for $590 million in March 2009;
• Refocus its home networking business for "greater profitability and connection to the company's core networking infrastructure" as Cisco expands it into a home video platform;
• Integrate its umi consumer videoconferencing product into the company's Business TelePresence product line, transitioning the product to an enterprise and service provider go-to-market model;
• Take the core video technology integration of Cisco's Eos media solutions business and use it elsewhere in the company.

Cisco says its four key company priorities remain core routing, switching and services; collaboration; architectures; and video.

"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.

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The decision appears to have been made rather quickly -- still, Chambers hinted back in April that "tough decisions" were going to be made -- or at least didn't trickle down to key stakeholders until recently. Through 10 days ago, I had a scheduled meeting with Cisco representatives to preview a new addition to the company's Flip consumer video line -- but the meeting was canceled (not rescheduled) without reason and the launch delayed.

It may also signal a drop in the popularity (and thus revenues) of these pocket camcorders in response to the ubiquity of HD video-capable smartphones. The Flip acquisition was a little bit fringe for Cisco, and a possible drop in sales could have opened the door for Cisco to take the intellectual property and shutter the product.

The company's umi product is in a similar situation, though didn't come with a built-in audience. When Cisco announced the product in October 2010, it said the product would bring healthcare, education and financial services to the home. While that may still be the goal, it's clearly better served by Cisco's enterprise group.

Its Eos social and cloud-based content platform is in a similar boat.

While it's clear that Cisco isn't punting on video as a core competency, it appears that the company has realized that its resources are better marshaled through its enterprise customer base. Simply: if it can't win in these spaces, it wants out.

One last note: Cisco was clearly enamored with the former Pure Digital team's ability to connect with consumers. That's why the team was given a crack at its consumer router business, with the Valet and Valet Plus as the result. Whether some of those skilled employees will be integrated within traditional Cisco strengths or let go is the burning question.