Cisco Systems Inc., one of the titans of the technology industry, on April 12 said it is killing the Flip Video, the most popular video camera in the U.S., just two years after it bought the startup company that created it.
It appears to be a case of a large company proving to be 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—including many educators—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—features that made the camera extremely popular among teachers and students. These features have been copied by many other manufacturers, but the Flip Video still outsells them.
“Yet another loss to teachers! Very sad. This is such a useful tool. Sorry so many will lose their jobs as well,” one eSchool News reader tweeted in response to the news.
“It’s a shame, those ‘camcorders’ really helped make movie making easier,” another tweeted.
Nicole Bremer Nash, a freelance writer in Louisville, Ky., calls the Flip Video “the little camera that could.”
“I was hoping they’d continue the line and expand the accessories for it, instead of getting rid of it altogether,” she told the Associated Press.
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, another Louisville resident. She’s 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.”
Rubin added: “It was a brand the company had invested heavily in and could have leveraged for all kinds of consumer video experiences—video conferencing, security applications, et cetera.”
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 shakeup at the world’s largest maker of computer networking gear. After several quarters of disappointing results and challenges in its core business, the company is reversing years of efforts at diversifying into consumer products.
A week ago, CEO John Chambers acknowledged criticism that the company has been spreading itself too thin. He sent employees a memo vowing to take “bold steps” to narrow the company’s focus.
The shakeup announced by the San Jose, Calif., company on April 12 will result in the loss of 550 jobs, or less than 1 percent of its work force of about 73,000.
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.
The company is also retrenching on another consumer video business—home video conferencing. In November, it started selling the umi, a $599 box that turns a high-definition TV into a big videophone. But signs soon emerged that the umi wasn’t doing well. Cisco cut the price of the unit in March, along with the monthly service fee, which went from $24.95 per month to $99 per year.
On April 12, Cisco said it will fold umi into its corporate video conferencing business and stop selling the box through retailers. Instead, it will sell the product through corporate channels and internet service providers.
Cisco’s Home Networking business, which makes Wi-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.
Cisco shares fell 3 cents to close at $17.44 on April 12. The shares are close to their 52-week low of $16.97, hit a month ago.
Analyst Simon Leopold at Morgan Keegan said the pullback on the consumer side is a good thing for investors, but not enough to set off a stock rally.
Consumer products have been a drag on Cisco’s results, because they carry profit margins that are far lower than the big-ticket capital equipment the company sells to corporations, governments, and schools, Leopold said. But the drag has been minor, because consumer products are still only a small part of Cisco’s overall business.
Last year, the Flip Video was still the top-selling video camera in the U.S., with 26 percent of the market, according to IDC analyst Chris Chute. But that only amounted to 2.5 million units sold. Dedicated video cameras are small potatoes compared to digital still cameras and smart phones, both of which now shoot video.
Top competitors in the pocket camcorder field, which could benefit from Flip Video’s demise, are Eastman Kodak Co. and Samsung Electronics Co. Rubin expects Kodak to pick up much of Cisco’s market share.
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