Guest post: Cisco flipping off Flip a bad decision

John Stepp, president of Free Tech Consultants, on Cisco’s recent restructuring announcement.

Cisco has always been an innovator. From networking to VOIP to telepresence, Cisco has always led the way with new technologies they continued to develop to meet the changing needs of the enterprise. The acquisition of TANDBERG last year and the announcement this year that Cisco would be video enabling all their enterprise end points are current examples of bold moves that clearly demonstrated leadership. That is why the Flip announcement is so puzzling. Why?

Sure, one can argue that the purchase of Pure Digital was a mistake to begin with. I disagree, but the point is moot. The deal was done. The costs were sunk. So why just quit? Is the R&D engine for this product so broken that there was no possible path to success? If that is the case then Cisco should be commended for ending the product. Better to do that than to sell it, spin it off or joint venture it when there is no possible path to success. But it is hard for me to believe that the Flip could not have been innovated and marketed effectively in some way shape or form. There are so many different directions this technology could have gone. Wi-Fi enablement, incorporation into an enterprise end point, 4G/LTE connectivity, better HD video features and many other innovations could have given the Flip and its’ market segment fresh legs and bolster the Cisco brand image. Killing Flip hurts the Cisco image, especially with the video-centric Flip user community.

The notion that smartphone cameras make candy bar cameras like the Flip obsolete is laughable to me, although it seems to be a theme in each article I read about the Flip’s demise. The best candy bar cameras are far superior to cell phone cameras and there is no reason that the Flip could not evolve to stay ahead of the pack. I recently bought the JVC Picsio waterproof candy bar camera, but probably would have bought the Flip had it been innovated properly. No phone or iPod nano can do what the JVC Picsio can. Flip is still the market leader, with unmatched name recognition and could have continued successfully.

So why are they just shutting Flip down? Why abandon their employees and their customers? Could they not have spun the company off to get their low margins off of their balance sheet? Could they not have done a joint venture with an established camera company like Canon or Kodak? If this is just part of a “bold” move to show that Cisco is serious about changing the company’s focus and influence investors, it seems to me there was a better way to do it. Some day we will know what has happened behind the scenes at Cisco and Pure Digital. Maybe it will make sense at that time. Today it seems like a terrible waste of talent and intellectual property.

The good news for Cisco is that the rest of their video story is very positive. The Cisco TANDBERG product line is already providing synergy that is attracting an ever growing number of customers. The video revolution in the enterprise continues to be led by Cisco. Margins that have eroded in their networking product line will soon be bolstered as the video revolution begins to explode during the next decade. Their stock is a good long term play in my opinion, but then again, I thought the Flip was, too.


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