Cisco Systems, which has seen disappointing financial numbers over the past few quarters, is shuttering its Flip video camera business, revamping other aspects of its consumer efforts and laying off 550 employees.
Cisco Systems, which has stumbled in
the past several quarters with lagging sales numbers, reduced profits and
weakened forecasts, is revamping much of its consumer unit, including
shuttering its Flip video camera business and integrating its Umi personal video conferencing technology into
its larger TelePresence business.
The moves, announced April 12, come after several quarters
of disappointing financial numbers, and a week after Chairman and CEO John
Chambers sent a lengthy memo to employees saying that changes will
be made to bolster the company's performance.
Overall, Cisco is looking for its
remaining consumer offerings to support the company's larger commercial effort
in four of five of its priorities: 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," 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."
Along with the dropped businesses and
restructuring charges of about $300 million that will occur because of the
moves, Cisco said about 550 employees will lose their jobs in the company's
fourth fiscal quarter. Cisco has about 73,000 employees.
Over the past several years, Cisco has
made a number of consumer-focused moves as it looked to expand its reach beyond
its core networking business and into such areas as video communications. Those
moves included the acquisition of Flip-maker Pure Digital and set-top box maker
Scientific-Atlanta.
Umi, the telepresence technology
designed to bring immersive video communication into the home, was released in
October 2010. Many analysts said the technology seemed sound, but questioned
whether consumers would pay the high price, especially considering the
availability of cheaper alternatives like Skype. In March, Cisco cut the prices
on the Umi.
Along with the moves around the Flip
and Umi products, Cisco officials said they are realigning the Home Networking
business.
Cisco has been pounded by investors and
analysts alike over the past few quarters, as Cisco executives had to explain
the relatively poor performance and weakened forecasts by the networking giant,
particularly at a time when other top-tier tech vendors-including Intel, IBM
and Google-were reporting big profits.
Chambers has said during conference
calls with analysts and journalists that some businesses-including the video
and data center units-are showing strong growth. However, Cisco saw weakening
in its core routing and switching businesses, particularly with the growing
competition from the likes of Hewlett-Packard and Juniper Networks.
Analysts have argued that Cisco's focus
on the consumer business was a reason for Cisco straying from its core
networking businesses, which has helped make it vulnerable to competitors. In
the second fiscal quarter of 2011, Cisco reported that revenues from the
consumer business had dropped 15 percent over the same period the year before.
However, one analyst in a quick note April 12 said that while the move is a
good start, more work is needed.
"While this is a step in the right
direction, it is not material in our view to [Cisco's] issues," Brian Marshall,
an analyst with Gleacher and Co., said in the note, pointing out that the
consumer business accounts for only 4 percent of Cisco revenues.
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