Friday, April 15, 2011

Cisco Sacrifices The Flip

On April 4th via a memo to employees, Cisco Systems CEO John Chambers came clean and admitted that while under his direction, Cisco has lost accountability with customers and shareholders and that the company will need greater discipline and focus to earn it back. That "discipline" came last week in the form of Cisco shedding its Flip camcorder brand.

This sudden change of direction couldn't have been what Chambers had envisioned in 2009 after Cisco capped off a string of acquisitions in the consumer realm with the purchase of Pure Digital Technologies, the maker of the Flip, for $590 million. But even then, there were people questioning the internet networking giant's logic.

After the acquisition, the New York Times wrote "such a consumer play is still a curious one for Cisco. The company tends to operate in the background, providing products that companies use to link phones and computers to the Internet." According to one analyst quoted recently, "the Street never fell in love with Cisco's consumer strategy." So much so that Kim Caughey Forrest of Fort Pitt Capital hopes "that there are more changes pending" and is "really disappointed" if dropping the Flip is Cisco's only move to break its consumer ties.

Cisco's portfolio of consumer brands also includes Linksys networking equipment, Scientific Atlanta set-top boxes, Umi home videoconferencing and even extensions into digital stereos.

Despite his broad vision, Chambers, in typical C-level fashion, pinned Cisco's troubles on poor "execution" and not poor strategy. Naturally, marketers have been quick to doubt this overused line. Although, in Cisco's case, I actually believe the brand strategy is (was) sound.

Much like a P&G or a United Technologies, Cisco managed to keep the individual brands in tact. They didn't combine them under one name or create sub brands that eventually cannibalized one another. Yet, they kept a "portfolio" of different brands that each had a unique meaning to the consumer.

The Flip video camera was the category leader with 23 percent of all U.S. sales last year, ahead of competitors Sony (22 percent) and Kodak (12 percent). Linksys is a category leader in home networking and Scientific Atlanta is a strong name in the set-top box category.

But I wonder if Cisco isn't truly a case of poor execution by a company managing consumer brands for the very first time.

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