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Cisco Systems, the networking giant that shuttered much of its consumer business last year as part of a larger companywide restructuring, reportedly is now looking to sell its Linksys home networking business.
Based on interviews with anonymous “people with knowledge of the situation,” Bloomberg on Dec. 16 said that Cisco has retained the financial firm Barclay’s to help it find a buyer for the Linksys unit, which Cisco bought in 2003 for $500 million as the first step in building up its consumer business. Bloomberg’s sources said that Linksys, as a mature business with low margins, probably would not command that kind of money this time around, though they expect interest from TV set makers.
After several quarters of disappointing financial numbers, Cisco executives in early 2011 started taking steps to restructure the company, which included paring its consumer business—such as closing down its profitable Flip video camera unit—and redoubling efforts in areas such as core business networking, cloud computing, mobility and video. Cisco also cut more than 7,800 jobs.
Linksys was spared the ax last year, with executives saying the plan to bind it more tightly to the company’s larger networking business. Still, there was speculation last year that both Linksys and WebEx, Cisco’s online collaboration unit, were possible targets for being sold or closed.
Since then, Cisco has continued to make WebEx a key part of its larger collaboration efforts. However, apparently Linksys has not flourished enough after being more tightly integrated with the company’s networking business.
The consumer area was one of almost three-dozen new markets—or “adjacencies,” as Cisco officials liked to say—that the company tried to extend into a few years ago. However, the aggressive efforts into these markets began to weigh on Cisco’s financial numbers, convincing CEO John Chambers to cut back on the expansion and focus on a few core segments.
Cisco hasn’t given up entirely on consumer technology: It still makes and sells set-top boxes via its Atlantic-Scientific unit, and this year it spent $5 billion to buy NDS Group, which makes software and security solutions for service providers and media companies looking to bring video to devices beyond traditional TVs.
However, Chambers and other Cisco executives have made it clear that the company’s future lies in hardware, software and services for data centers. Already the leading provider of IT networking gear, Cisco in recent years has looked to grow its presence in the data center. That includes its Unified Computing System (UCS), a converged solutions that includes not only Cisco networking technology, but also Cisco-branded servers, storage from partners such as EMC and NetApp, and virtualization technology from VMware.
Earlier this month, Chambers, talking with financial analysts in New York City, said that Cisco not only will continue to invest in data center hardware, but also is going to increase its efforts in software and services to help reduce its reliance on switches and routers.
Software eventually will account for 25 percent of Cisco’s revenue, he said. For the last fiscal year, software was 21 percent.