The End: Cisco Shuts Down Flip, a $590 Million Mistake


Cisco is giving up on its barely two-year-old $590 million purchase of Pure Digital Technologies, announcing today that it is closing its Flip business unit and cutting 550 employees as part of a larger restructuring. The move comes after clear signs that the outsized deal was not paying off for the technology giant, which is in the midst of refocusing its business on its core networking business.

Cisco said it will close the Flip business, but will continue to support current Flipshare customers who upload and share media to the web. Cisco said it will also refocus its Home Networking business to make it more profitable and connected to the company’s networking infrastructure. It will also move Umi, its consumer Telepresence, into the business Telepresence line and sell it through an enterprise and service provider go-to-market model.

“We are making key, targeted moves as we align operations in support of our network-centric platform strategy,” CEO John 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.”

The closure of the Flip unit comes a couple months after former Pure Digital CEO Jonathan Kaplan left Cisco, prompting questions about the direction of the Flip line of video cameras. Cisco bought Pure in March of 2009, saying the purchase was about extending its presence into the consumer electronics business. The company was also looking to use Pure’s smarts in simple consumer electronics design to rework its home networking business. While the deal has helped Cisco create a new line of more consumer friendly home routers, it didn’t really change the company much, a task that Om mentioned recently is incredibly hard for large companies. And it hasn’t resulted in a big revenue driver in video cam sales.

That’s because while Flip grew fast with its single purpose design, which managed to move millions of units, its continued growth was checked by the rise of smartphones that can increasingly shoot HD video while offering more wireless sharing options, something Flip’s camera’s never included, an irony for a networking company. Another new consumer business, Umi, a home video conferencing product, has also failed to capture a lot of buzz, in part because of its high price. With Kaplan headed toward the door, we speculated that the deal for Pure had turned into a flop.

Now it appears that Cisco is making that conclusion official. CEO John Chambers earlier this month laid out a major reorganization for the company in a memo to employees outlining how the company would refocus on five areas: core routing, switching and services; collaboration; architectures; and video. While Chambers said Cisco would still focus on video, it appears he was not referring to Flip. This deals a major blow to the idea of a single-purpose simple video cam, which may still have a niche place in the market. But while Cisco jettisons Flip, and admits defeat, the move shows the company is clearly serious about retrenching and getting back to basics.

You're subscribed! If you like, you can update your settings


Comments have been disabled for this post