POLL: Should Cisco Kill the Linksys Brand?

16 Comments

PC Advisor, a UK-based magazine, reports that Cisco Systems (CSCO) may phase out its Linksys brand all together, making the company it acquired in March 2003 for $500 million a product category, according to Cisco’s VP of SMB solutions marketing, Rick Moran.

Last year, Cisco CEO John Chambers ruffled some feathers when he made similar kill Linksys noises. (See YouTube video) The idea is to simplify the product lines and branding. I wonder if it is such a good idea? In small biz and SOHO markets, Linksys is more well-known than Cisco. Moreover, this goes against Cisco’s strategy to woo the consumers. Have your say in our poll, below the fold.

16 Comments

Len Feldman

Cisco’s rush to rebrand Linksys reminds me of Nissan’s decision to drop the Datsun name in the U.S. market. When Datsun became Nissan, even after a period of co-branding to introduce consumers to Nissan, sales dropped considerably and didn’t recover for years. Cisco’s done the same thing at Scientific-Atlanta, and from what I can see, it hasn’t increased sales, but it has demoralized the troops in Atlanta. I think that what Cisco is currently doing is correct–the Linksys brand predominates, but the Cisco brand is also on the product.

John

Good timing for the post:

Cisco Changes Tack In Takeover Game
The Wall Street Journal. April 17, 2008
“At the time, the most sophisticated Cisco networking gear cost more than $100,000, while Linksys’s consumer products started at less than $100. Linksys also sold its products through retailers, with which Cisco had little experience. To avoid inadvertently damaging the newly acquired company, Cisco has kept in place the Linksys brand name, Linksys manufacturing agreements and its sales team.”
http://online.wsj.com/article/SB120839835016421829.html

broadband fan

Has anybody heard of the linksys brand outside the U.S.? Not sure about Europe, but from what I’ve seen, linksys in not well known in Asia or LatAm

On the other hand, the Cisco brand is well recognized overseas. May still need to build the brand at the consumer or SOHO level. Scientific Atlanta brand is gone. All new SA products are Cisco branded. Scientific Atlanta is now the Service Provider Video Technology Group SPVTG for shor :-)

Iain

I’ve always thought that Cisco liked the revenues of Linksys, but not the gross margins and resulting multiples the “Street” gives the “consumer” segment.

A quick look at Netgear (http://finance.yahoo.com/q/ks?s=NTGR) reinforces this. It’s a different world.

        Cisco   Netgear

P/E T 18.53 14.94
P/E F 14.10  9.25
P/S            3.66  0.89

blognround

Good posts, Curtis is right on. Cisco should be expanding branding not consolidating it, based on segments.

JC should ask “How well is this integration strategy working?”

…. I think Cisco brand is actually tarnished of late, and keeping distinct segment based brands are a better long term direction. CSCO can’t scale like it could when it was a smaller company. If it can’t scale as a big aggregate, JC should try a more organic, ‘network’ oriented growth model. The point of the branding should consider how will it allow us to grow the company. Changing Linksys, doesn’t seem to impact growth or the deeper long term scaling issue.

the growth rates aren’t sustainable, and thus stock will likewise perform more modestly.

Curtis

I think all commenters have made good points in terms of technology messaging and channel management, however I think the key challenge to Cisco regarding the Linksys brand is the national advertising and the subsequent messaging for each market segment. It would be extremely difficult for Cisco to advertise to the SOHO marketplace using Cisco as the leading brand while concurrently advertising nationally to the enterprise marketplace using Cisco as the leading brand. This will ultimately lead to confusion amongst both market segments. Remember, marketing to the enterprise segment is typically the stodgy corporate messaging whereas the messaging to the SOHO market segment is more consumer oriented. If Cisco kills the Linksys brand, I think they’re asking for a world of hurt in the SOHO space.

Scott

I don’t think I directly addressed the poll. I don’t think Linksys should go away. What I do think should happen is to approach the SMB space from a Cisco branding perspective differently. Establish a different sales relationship with SMB Partners and customers than the one that’s currently in place. I don’t think it would wise to expand the Linksys brand upward either.

Scott

For the last several years Cisco has been making it known that they want to grow in the SMB space. I really think it’s a large part of the reason they bought Linksys but it’s also what’s been driving some of their moves into smaller products such as the UC500, CE500 and other related “Express” product lines. Some of these are cost competitive but many are still not. And, there’s a huge price gap between the “Express” lines and the Linksys product. Still, some of these Cisco solutions can be pretty compelling. That’s not the problem though. The problem is how they sell the Express line.

Cisco, not Linksys, relies on Partners to sell, in large part. They have local Account Managers but the AM’s have a (big) quota and selling to SMB’s ain’t gonna get it done. They’re really only chasing the bigger M’s in SMB. So, the S in SMB falls to the Partners. For all the talking Cisco does about SMB’s its heart really isn’t in it. Or rather, the executives really want it but the sales and marketing structure in the field isn’t set up to support it.

What you wind up with is Partners trying hard to sell into SMB space to get scooped by a)CDW or b)local AM who wants to make it a big opportunity. Customer either gets scared of the hard sell or they get basement prices from someone else. Sales to CDW don’t help the local AM’s so the Partner gets no visibility. No visibility means no help from the local AM’s. Big Ben, Parliament…

The type of user in the SMB space generally requires some level of assistance from an integrator. Starving off the integrators that service that space because of the nature of the sales channel doesn’t help.

Yes, I work for a small integrator that’s a Cisco Partner. This is a daily struggle for us.

the rabbit

Aside from firmware hacking (great point Jonathan Fingas) consumers aren’t aware of the hardware limitations/potential on their Linksys products. I think if Cisco dissolved the name it wouldn’t greatly impact sales once the “learning curve” of the name change resolved itself.

If they want to really salvage the brand they can use their infrastructure and size to create better consumer tech products. Linksys, to me, seems to the be the Sony of the Networking industry. Pretty designs that are limited and come with a higher price tag for no apparent reason. Again, firmware hacking aside. Cisco to the home consumer is known only as a big-corporate-tech company.

techboy2000

Branding is more than just a name and logo. Slap a Cisco name on the venerable and adorable WRT54G router and sales will not shrink a bit.

Jonathan Fingas

Initially I had wanted to say Cisco should kill the Linksys name, but that would only work if Cisco vowed to improve the worth of its consumer networking gear.

Linksys actually carries a somewhat tarnished reputation among enthusiasts — firmware hacking aside, the company is known for actually finding ways to offer less (halving the RAM on routers) or not really offering the best bang for the buck. I can’t imagine Cisco allowing any negative press from $100 home routers to rub off on business-class equipment that costs ten or a hundred times as much.

Michael Megalli

Absolutely not. LinkSys (and to a lesser degree Sci-Atlanta) are departures for the company. Cisco’s tried-and-true strategy of acquiring companies for their technology and immediately incorporating them into the whole, does not hold up with these brands. Ultimately the cost of maintaining these well-established brands is negligible while the cost of building Cisco into a brand with any relevance in the consumer market would be quite high.

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