Cisco to close Flip camera unit as smartphones swallow its market. Why?

Piers Fawkes, PSFK
  • 13 april 2011

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This article titled “Cisco to close Flip camera unit as smartphones swallow its market” was written by Charles Arthur, technology editor, for on Tuesday 12th April 2011 17.30 UTC

The networking and router company Cisco is shutting down the consumer-oriented Flip camera business that it bought for 0m in 2009. The move will mean the loss of 550 jobs worldwide, cost Cisco 0m – and disappoint thousands of users who had enjoyed the devices’ simplicity.

The shutdown, announced on Tuesday afternoon as part of a widespread reorganisation as the company attempts to rejig its business, will see Cisco reorganise its remaining consumer businesses to support its existing “key priorities” – notably the routers and switches that generate the majority of its sales.

Though Cisco never broke out revenues from the Flip division, they are believed to be small: its latest accounts show that “other products” – understood to include its Linksys routers and Flip cameras – generated revenues of just 1m in the most recent quarter, down from 9m the previous quarter. Profits or losses for the division were not disclosed.

A spokeswoman for Cisco would not say whether the company had tried to sell the Flip business, but the fact of the closure suggests it was impossible to find a trade buyer.

That in turn suggests that the stand-alone movie camera business is effectively dead, killed off by smartphones capable of shooting high-definition video which have seen explosive sales in the past 18 months – precisely the period since Cisco bought Flip.

The Flip camera, made originally by Pure Digital Technologies, burst to prominence in September 2007, before the widespread penetration of smartphones. Only 80m smartphones were sold in 2007 – but that rose to 304m out of the 1.6bn phones sold in 2010. By contrast, Flip had sold 2m of its cameras by January 2009. Yet it was one of the most popular stand-alone camcorders on sale through Amazon, and in 2008 it was estimated to have a 17% share of the .4bn camcorder market – behind only Sony, with 21%. But Sony held on to its lead and seems to have extended it in 2010 as the low-end market was eaten by mobile phones with video capability.

Flip’s devices were hampered because while they were the same size as a smartphone, they could not offer a number of features that smartphones or high-end “feature phones” could, such as uploads to online sites; but they didn’t offer other features either such as Wi-Fi connectivity – though this was often hinted at by executives – or microphone sockets, which could have made them useful for some professionals. At the same time high-end professional cameras have begun to offer high-definition filming, leaving the Flip models without a viable market.

Cisco is embarking on a widespread review of its businesses. A week ago, Cisco chief executive John Chambers sent employees a memo vowing to take “bold steps” to narrow the company’s focus after several quarters of disappointing results – though the company is far from loss-making: in its last financial year, to the end of August 2010, it saw revenues rise 11% to bn and profits up 26% to .8bn.

The 550 job losses will have little impact on the total headcount within the 73,000-strong company, and a spokeswoman said it would try to find them jobs within Cisco.

Cisco’s spokeswoman would not guarantee that the Linksys router business was guaranteed to survive the review, but said that it offered a “market-leading product” and that it demonstrated a good fit with Cisco’s core businesses.

• Ray Sangster, Flip’s chief executive for Europe, Middle East and Africa, spoke to the Guardian’s Tech Weekly podcast in July 2009, insisted that the acquisition would bring “synergies” between Linksys, Cisco and Flip but that he couldn’t discuss them at the time because “they haven’t been finalised”. © Guardian News & Media Limited 2010

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