Cisco Systems, which almost two years ago shuttered its profitable Flip video camera unit, is now getting rid of another remnant of its consumer business, selling its Linksys consumer networking unit to Belkin.
The deal for the home networking business, announced Jan. 25, is the latest by Cisco in its effort to exit the consumer technology business, part of a larger restructuring of the company that began in 2011. Other victims of Cisco’s purge included the Umi personal telepresence system, which the company ditched in January 2012 after 15 months on the market.
Belkin’s acquisition of Linksys will ensure that the technology continues to grow and evolve, according to Hilton Romanski, vice president and head of corporate business development at Cisco.
“Combined, Belkin and Linksys will create a world-class consumer networking technology provider with complementary innovation and engineering strategies,” Romanski wrote in a Jan. 24 post on the Cisco blog site. “Linksys will enhance Belkin’s capabilities to meet the needs of OEMs, as well as provide access to a large user base.”
No financial numbers for the sale were released, and Belkin officials expect the deal to close in March. Romanksi said Cisco and Belkin will “pursue a strategic relationship focused on a variety of initiatives including retail distribution, strategic marketing and products for the service provider market.”
Belkin CEO Chet Pipkin said the deal will help his company to reach its ambitious goals.
“Our two organizations share many core beliefs—we have similar beginnings and share a passion for meeting the real needs of our customers through the strengths of an entrepreneurial culture,” Pipkin said in a statement. “Belkin’s ultimate goal is to be the global leader in the connected home and wireless networking space and this acquisition is an important step to realizing that vision.”
Belkin officials said they will maintain the Linksys brand, and will continue offering support to Linksys customers and honoring warranties. With Cisco’s home networking business in the fold, Belkin will own about 30 percent of the retail home and small business networking market in the United States, according to officials.
Cisco bought Linksys for $500 million in 2003 as it pushed to expand its reach into the consumer market. Over the next few years, Cisco officials would look to ride its success in networking into almost three dozen new markets—or what Cisco officials called “adjacencies”—including the consumer space. However, that effort came at a cost, as Cisco suffered through several quarters of poor financial numbers and analysts said that by looking to expand so quickly, company officials took their attention away from its core networking business, opening up opportunities for rivals such as Hewlett-Packard, Juniper Networks and Huawei Technologies.
In 2011, CEO John Chambers announced that Cisco was going to restructure, paring down the number of markets it was operating in and focus on a handful of areas, including the core switch and router markets, cloud computing and collaboration.
Rumors of Cisco selling Linksys had cropped up here and there since Chambers shut down much of the company’s consumer businesses, including the Flip camera, in 2011. In December 2012, reports surfaced saying that Cisco had contacted Barclay's to help it find a buyer for the Linksys unit. At the time, sources told Bloomberg that Linksys, as a mature business with low margins, would not command the $500 million that Cisco paid for it this time around.