Cisco, the computer-networking giant, announced Tuesday that part of its restructuring plan will including shutting down the company’s Flip video camera division that it bought just two years ago for $590 million.
The about-face comes after several quarters of disappointing results and challenges in its core businesses. Analysts say the company has been trying to do too many different things.
The decision marks a retreat from the consumer market for Cisco, which purchased Pure Digital Technologies, Flip’s parent company, in March of 2009 in a stock transaction.
“We are making key, targeted moves as we align operations in support of our network-centric platform strategy," said John Chambers, Cisco’s chief executive, 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.”
Cisco appears to see no point in selling the business — the announcement Tuesday said Flip will be closed down. It will continue to support the sharing of Flip videos online.
The company said it will realign its remaining consumer business to support four of its five key priorities — routers and switches; corporate communications and collaboration equipment; servers for data centers and video.
The restructuring, which will include changes to other divisions of Cisco, will result in the dismissal of 550 employees by the end of 2011 and a charge of up to $300 million.
The Flip video camera had been one of the great hardware-start-up success stories of the previous decade. Conceived by a small number of engineers in an office above Gump’s department store in San Francisco, the camera went on sale in 2007 and went on to dominate the camcorder market, selling two million units in its first two years and remaining the top-selling camcorder on Amazon to this day.
A testament to Pure Digital’s success with the Flip are the many imitators that the start-up has inspired. Existing camera heavyweights like Sony and Kodak rushed to release their own Flip-like camcorders in the wake of the Flip’s runaway sales.
But the second half of the last decade also saw a new device appear on the technological landscape. The smartphone, which can record video and still images, as well as perform myriad other functions, started to gain traction among consumers just as the Flip was reaching its zenith. With an onboard camera that was as good or better than what could be found in a Flip, plus everything else the smartphone can do, it proved to be a more versatile — and, therefore, more desirable — product than a single-function device like the Flip.
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