标签: cisco systems inc.

The death of the Flip video camera is like the opening of a great murder mystery—or at least a decent Law and Order episode. Someone (or in this case, something) has been killed, there are a few suspects, but very few clues.     Or, more accurately, we know who done it: Cisco Systems Inc., the Silicon Valley networking gear giant that set its sights on the consumer video market and forked over $590 million to acquire Pure Digital Inc., the inventor of the Flip, in 2009. What we don't have, and what very few people appear to have even sound theories on, is motive.   Clearly, Cisco wanted out of a consumer business that it never really understood and that offered pitiful margins compared with Cisco's big ticket networking gear. (As evidence, several analysts cite the flop of Cisco's Umi video conferencing devices, which carried a price tag—$600 plus $25 per month for service—that many felt was untenable.) But the company's decision to pull the plug on the Flip business—rather than sell it off—has many people scratching their heads.   The Flip, which first hit the market under that name in 2007, is currently the No. 1 selling camcorder on Amazon.com—the black Flip UltraHD, that is. A total of four Flip models are among the top 10 selling camcorders on Amazon. According to the New York Times, a total of 7 million Flip camcorders have been sold to date and Cisco itself claimed that Flip represented 35 percent of the camcorder market.   "At the end of the day, they were selling quite a few of these things," said Michael Gartenberg, an analyst at market research firm Gartner Inc.   But despite this impressive positioning, it's pretty clear that nobody would have paid Cisco anywhere near $590 million to acquire the Flip business—and here is where our chief suspect, smartphone convergence, comes in. The market for camcorders, especially small, mobile camcorders like the Flip, is on the wane. In fact, according to market research firm IHS iSuppli, overall camcorder shipments have been relatively stagnant since at least 2003—the firm projects that in 2012 about 17.2 million camcorders will ship worldwide, compared to about 17.3 million in 2003.   Analysts have long warned that gadgets that specialize in one thing would be threatened by the convergence of devices that can do several things. Smartphones are the biggest thug, growing enormously in popularity and—in a competition for marketshare among each other—rapidly adding new functionality. The fact of the matter is that nearly everyone who packs a smartphone today—and even more so a year or two from now—is already lugging around a pocket-sized device that shoots video of comparable or better quality than the Flip.   Even so, someone would have paid something for the Flip business, which would have included a market-leading product, a lauded brand and a creative team of designers who shocked the world once and, who knows, could do it again.   What accountants have to say Sources said Cisco had signaled its desire to exit the consumer market and was advised to seek a buyer for the Flip business. It is not known if Cisco engaged in discussions with any other company about a possible sale. A spokesperson for Cisco did not immediately respond to a request for an interview.   "Sometimes it comes down to what the accountants have to say," Gartenberg said. According to Gartenberg, it seems likely that Cisco calculated that it would be easier and ultimately less costly to simply shutter the unit and write it off, rather than going to the time and trouble of finding a buyer and selling Flip at a considerable loss. "Someone at Cisco ran the numbers and decided that this was the way to go," Gartenberg said.   New York Times columnist David Pogue last week theorized that the most plausible reason Cisco choose to kill the Flip business rather than sell it is because Cisco wants to hold onto the Flip technology , presumably to apply to other areas. But it's not clear what about the Flip technology would be applicable to Cisco's other businesses, though the company said in its statement last week that video remains one of its five key company priorities. (Pogue also reported that Cisco was supposed to release a new Flip model last week, FlipLive, capable of live video broadcasting to the Internet).   Jordan Selburn, a consumer electronics analyst at market research firm IHS iSuppli, said that despite Flip's position in the marketplace, the Flip unit may have simply been unprofitable. "Cisco may have simply decided that they don't have consumer DNA," Selburn said.   "Part of the problem with Flip was once you bought one, you never had a reason to buy another one," Gartenberg said, adding that Cisco "lacked an understanding of the marketplace."   "This is a sad thing for the whole industry," said Rick Doherty, co-founder and director at the Envisioneering Group. Doherty said the Flip design team made a serious impact on the consumer electronics world and predicted that its members would resurface and "spread their wings."   "Camcorders are still a good business for many people," Doherty said. "There will be more innovation there, and great things will probably be coming. It's just a shame that Cisco took this route of not heeding industry trends and not, it seems, even respecting the company that they acquired."     So it would seem that we can't make a case against convergence alone in the killing of the Flip. But clearly its fingerprints were among those found at the scene of the crime. According to Selburn, the "dedicated single-tasker"—a gadget with only one application—is under fire in all areas of consumer electronics, thanks in large part to the threat posed by multiple-application devices like the smartphone and media tablet. "That doesn't mean that they are all going away or doing badly," Sulburn said.   Let's take a look at some of the other heretofore popular—even beloved—consumer electronics devices that face threat from this menace at large.   MP3 player/iPod         Yep. Even the Babe Ruth of consumer electronics gadgets (they both changed forever their respective games) faces pressure from the convergence of applications in smartphones, most specifically by its dastardly younger brother, the iPhone.   Apple reported selling 19.45 million iPods in the first quarter of this year—brisk business to be sure, but the lowest first quarter total for the iPod since 2006. Okay, so the iPod isn't going to disappear in the next few years or, probably, in the next few decades. But there is a clear trend line.   According to Gartner's Gartenburg, standalone, single-application devices such as music players can continue to command a significant market—albeit a declining one—as long as over time they get less expensive and continue to evolve.   "If business wasn't a good business, Apple would be out of it," Gartenburg said. "They are still very much in it, refreshing that product every year, even though they have other products like the iPhone that function as a music player."   According to IHS, after peaking at more than 197 million units in 2007, the market for all digital music players is projected to decline from 180.1 million units in 2010 to 160.6 million units next year.   "The market isn't going away," Selburn said. "But for a market that was pushing 200 million units a few years ago, we are looking at about a 40 percent decline between 2008 and 2016."   Selburn says the biggest remaining advantage for single-taskers overall, and perhaps for the music player in particular, is that the apps-packed smartphones and media tablets also carry monthly data fees. For a 10- or 11-year-old kid—or anyone for that matter—who just wants to listen to some music but doesn't care to check email, tweet or update his/her facebook status, the iPod and its like are still the way to go, Selburn pointed out.   Digital music players "won't go away unless the data plan costs go away," Selburn said. "And that seems to be headed in the other direction."   Interestingly, though sales of the iPod and other music players are in decline, there has been a shift in sales toward higher-end music players, rather than the low-end, according to Selburn.