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New York • Cisco Systems Inc., one of the titans of the technology industry, on Tuesday said it is killing its Flip Video camera, the most popular device of its kind in the U.S., just two years after it bought the startup that created it.
Apparently bringing an end to a controversial foray into selling hand-held gadgets to consumers, Cisco Systems said Tuesday it will cut 550 jobs as it turns its focus back to selling networking gear and other tech products to businesses and public agencies.
Cisco also said it will "realign" other consumer product segments, including home video-conferencing systems and home routers, by folding some of them into divisions that sell similar equipment for business use.
San Jose, Calif.-based Cisco announced the changes a week after CEO John Chambers told analysts and the company's 72,000 employees that he would be making difficult but "targeted" decisions to get the tech giant back on track after a series of disappointing financial reports left Cisco's stock wallowing at two-year lows.
Tuesday's news was generally applauded by Wall Street analysts, including several who had argued the company spread itself too thin by expanding beyond its core networking business in recent years. Gleacher & Co. investment analyst Brian Marshall called the announcement "a step in the right direction."
Cisco shares fell 3 cents, to close at $17.44 in trading Tuesday. The shares are near their 52-week low of $16.97, hit a month ago.
It appears to be a case of a big company proving a poor custodian of a small one, even one that makes a hit product. Cisco never meaningfully integrated the Flip Video into its main business of making computer networking gear.
Flip Video users are now lamenting the demise of a camera that broke new ground. It was inexpensive, pocketable and very easy to use, from shooting to editing and online sharing. These features have been copied by many other manufacturers, but the Flip Video still outsells them.
The Flip Video is named after an arm that flips out of the camera body and lets the user connect it directly to a computer. The camera even contains video-editing software that fires up on the computer.
"I just find it a really easy process to use, and that's why I really enjoy my Flip camera," said Courtney Sandora.
She has been using Flip cameras for three years and said she was "saddened and shocked" by Cisco's decision.
"There were many opportunities for Cisco to integrate Flip more into its vision of a networked world," said Ross Rubin, an electronics industry analyst at NPD Group. "The camcorders, for example, never even had Wi-Fi built into them."
Cisco didn't explain why it's shutting down the Flip Video unit rather than selling it. But the decision is part of a larger shake-up at the world's largest maker of computer networking gear. After several quarters of disappointing results and challenges in its core business, it's reversing years of efforts at diversifying into consumer products.
Cisco is one of Silicon Valley's largest tech companies, with more than $40 billion in annual sales. The company is profitable overall, but it has disappointed Wall Street in recent months as its profit margins have shrunk and the company has scaled back some of its forecasts for growth.
Many analysts had been expecting Cisco to cut back its consumer operations, which reported a 15 percent decline in sales for the last quarter. Cisco announced the departure of consumer products chief Jonathan Kaplan a day after it reported those results in February.
Cisco expects to take restructuring charges of no more than $300 million spread out over the current quarter, which ends April 25, and the following one.
Cisco's Home Networking business, which makesWi-Fi routers and has the 2003 acquisition of Linksys at its core, will be "refocused for greater profitability," but Cisco will keep selling the routers in stores.
Top competitors in the pocket camcorder field, which could benefit from Flip Video's demise, are Eastman Kodak Co. and Samsung Electronics Co.