Cisco's Misguided Foray Into the Living Room

Cisco Systems, a company best known for selling mundane (albeit very lucrative) routers, switches and other networking gear, has designs on the consumer electronics market. To that end, at the upcoming CES trade show, the company plans to launch a whole series of products that fall under the connected, networked entertainment category. For those of us that have been covering tech for some time, the idea of Cisco as a consumer brand is chuckle-worthy!

Chuckles aside, this is just like an NBA star trying to play baseball. It didn’t work for Michael Jordan and it isn’t going to work for Cisco. The closest the router and switch maker gets to the consumer is with Linksys, a company it acquired in March 2003 for $500 million. Of course, since then Cisco has put Linksys into the Cisco Consumer Business Group. (The products are still branded Linksys…for now!)

While that group has managed to make a splash in the home networking and SMB gear market, it is hardly a powerhouse in the consumer electronics business. In order for Cisco to compete with Samsung, Sony and even Apple, the company would need to rewire its entire DNA, and unfortunately, it ain’t got the skills.

Cisco has a checkered past when it comes to diversification into new markets. Take, for example, its foray into the carrier network business. It spent billions of dollars buying companies like Cerent and Pirelli’s optical division, but has had limited impact in the telecom world (beyond selling its core products.) Lets face it: Cisco’s skills are in selling equipment to “corporations” and “the government,” which is why their push into telepresence (video conferencing) and data center-related equipment makes a lot of sense.

How does a company that gets big fat margins from selling expensive equipment (and paying its sales team accordingly) live with the razor-thin margins of consumer entertainment gear? For Cisco this would like climbing Mount Everest without an oxygen tank. 

And this is not the first time Cisco has chanted the consumer mantra. I talked to them three years ago and they had the same grand vision (just a different guy doing press briefings). They’ve spent nearly three-quarters of a billion dollars (that’s before Scientific Atlanta) to buy consumer-focused companies — Linksys ($500 million), Pure ($120 million) and KISS technology — not to mention some investments in CE startups like Akimbo. With the exception of Linksys gear, they have nothing to show for it.

Ned Hooper, a senior V-P with Cisco, tells the The New York Times that there will be a lot of connected televisions and other devices in the coming years. I agree. Then again, even Yahoo has figured that out. What Cisco should be focusing on is how to make the “home network” work smarter. Instead of building its own gear, it should join forces with other equipment makers to build features that would make moving media inside the home possible.

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