As the company chairman admits there are issues, I expect Cisco to take a hard look at some of its newest ventures and acquisitions.|
by Lance Ulanoff, published on April 6, 2011
I've been reading through Cisco chairman John Chamber's well-crafted, heartfelt staff memo. The call to arms letter comes on the heels of two less-than-stellar earnings quarters and says that while the $40 billion company has great "foundational strengths," it needs more discipline.
Cisco has also "been slow to make decisions, ... had surprises where we should not," and "lost the accountability that has been a hallmark of our ability to execute consistently for our customers and our shareholders," Chamber writes. He repeatedly praises Cisco employees, but makes clear that the company has stumbled. The letter also contains a warning: changes are coming; there will be pain. However, Chambers never outlines exactly what's gone wrong or what those changes might be. Allow me to offer some ideas:
UMI is the consumer home video conferencing product that Cisco has spent millions advertising on television, in magazines, and online. They probably spent at least twice as much on ads than they developing the product. But I think it's fair to say no one is buying it. It could be the name; I called it "terrible" last year and hoped Cisco might consider changing it. I believe it's supposed to sound like you're saying "You Me," but even the pint-sized actress Ellen Page couldn't make consumers want this over-priced Skype video competitor.
Cisco isn't exactly bursting with confidence when it comes to UMI, either. Search Google for some UMI reviews. You'll find a "hands-on" here and there based on Cisco events that showcased the product, but you won't find any full reviews by the major tech media brands. Not even PCMag, since Cisco hasn't sent us a unit. What is that all about?
UMI is probably the grossest miscalculation in Cisco's history. To be fair, Cisco is not a traditional consumer electronics company like Sony or Samsung. While most consumers see Cisco's routers and now its Flip line of consumer video camera products, there's a whole other part of the businessreally the largest partthat deals with corporate networks, storage, servers, heavy iron storage and more.
Cisco Squeezed itself into the Data Center business in 2009 and, according to reports, holds just a fraction of a market dominated by IBM, HP, and Dell. More worrisome for Cisco is the fact that smaller players could get edged right out of the market as companies move their data center business to "cloud providers" like Amazon.
Cisco bought the Flip camcorder business in 2009. It was a good, smart acquisition, but most of what the company has released since then hasn't moved the pocket camcorder market forward. The Cisco Flip SlideHD was expensive, lacked full HD capture, and its still image abilities didn't match up to those of the competition. I haven't seen a single one out in the wild. However, I bet the SlideHD is not the main culprit for Cisco's woes in this space. Instead, it's the ubiquitous smartphone. Most, including the iPhone 4, Droid X, and EVO, ship with built-in camcorders that shoot video just as well as the Flip. Some add built-in YouTube upload capabilities. The Flip is a single-function device that takes up precious pocket space. If consumers can carry one device that makes calls, handles emails and contacts and takes great video, why do they need a Flip?
Cisco has plastered the world with ads for the Flip camcorder. They usually feature celebrities who make the product seem cooler and more desirable than it really is. I think the problem is that consumers are enjoying the ads but ignoring the product. Likewise, as I mentioned above, Cisco spent big bucks on not only advertising the UMI and attracting celebrity endorsements, but apparently paid NBC to build an entire 30 Rock episode around the technology; something to do with Jack Donaghy having bed bugs. In fact, this is not the only product placement for which Cisco has paid. I doubt if any of this moved the bar on UMI or other sales, however.
What's worse is that I do not think Cisco hasn't given enough advertising and marketing attention to its best consumer product, the Cisco Valet Plus router. The Valet is easily one of the best home Wi-Fi routers I've ever used and installed, yet I haven't seen yet to see a subway, train, magazine, or TV ad for it.
When I met with Cisco a year or so ago about the Cisco Valet Plus, I was impressed. Not only was this the best-looking router I had ever seen, but the product aced our tests, and I assumed that soon Cisco would own a healthy chunk of the home Wi-Fi router market share. However back then and with Cisco's latest router announcements, there remains some confusion about which brand name will lead for its consumer line of routers. Cisco continues to roll out Linksys routers at the same time as the Cisco Valets.
Here's how Cisco's PR represntatives explained Cisco's wireless router branding:
"Cisco is the master brand for all products. Linksys by Cisco was introduced about 2 years ago to align the Cisco and Linksys names together for only 16% of the people we surveyed then knew that Linksys was owned by another company. We had felt a year in the market place as Linksys by Cisco will help align the brands so we could transition to the master Brand Cisco over time. Last year when we launched the E-Series it was known as Cisco Linksys E-Series. The launch of the new routers in the E-Series continues to be Cisco Linksys E-Series. Cisco is the master brand and Linksys is the family name."
Chambers said in his memo Cisco had confused employees and shareholders; maybe this is what he was talking about.
What Can and Should Cisco Do?
Discontinue UMI: It's a dud, and I think Chambers knows it.
Pull Back on Flip: The company has used Flip DNA to help reinvent some of its core products, like the Cisco Valet, but I think Cisco will spend far fewer resources on Flip R&D, marketing, and advertising over the next 12 months.
Look for a Flip Buyer: Over time, Flip will become less and less integrated with the company's core business. I expect them to flip Flip.
Embrace Cisco: One benefit of all that UMI product placement is that now more consumers know who and what Cisco is. Use the Cisco brand everywhere and walk away from the too-technical-sounding Linksys (at least in the consumer space).
Embrace the Cisco Valet: It's great product that makes setting up a new router and Wi-Fi network a breeze, and one that needs the full support of its parent company. Stop spending on other promotional efforts and go after this one. Cisco could own this space.
Focus on the Cloud: Cisco understands networking and storage well enough that it could become a major player in cloud-based services. It already offers the very effective WebEx Web conferencing tool, and has introduced Quad cloud-based social networking and collaborative services for SMBs. Now it needs a full suite of small-, medium-, and large-sized business services that move data and storage into a centrally-located cloud offeringwhen they build one.