Cisco closing Flip business, cutting 550 jobs

SAN FRANCISCO, California – US networking giant Cisco announced Tuesday it is shutting down its Flip video camera business, which it bought just two years ago for $590 million, and cutting 550 jobs.

Cisco’s surprise decision to shut down the Flip unit was part of what the company said was a move to exit aspects of its consumer businesses and focus on other priority areas.

Cisco said the shutdown of Flip will result in restructuring charges of up to $300 million this fiscal year and the elimination of 550 jobs.

“In the end this showcased again what can happen if a company that has no consumer skills tries to do a consumer product,” said analyst Rob Enderle of Enderle Group in Silicon Valley.

“They waste an incredible amount of money making mistakes that any consumer expert likely could have, and a number of us did, point out to them.”

The San Jose, California-based Cisco said it would support current Flip customers and partners with a transition plan.

Cisco bought San Francisco-based Flip maker Pure Digital Technologies in March 2009 in a move that signaled a more consumer-oriented shift by the leading manufacturer of switches and routers.

In a statement Tuesday, Cisco said it was realigning its remaining consumer businesses “to support company priorities — core routing, switching and services; collaboration; architectures; and video.”

“We are making key, targeted moves as we align operations in support of our network-centric platform strategy,” Cisco chairman and chief executive John Chambers said in a statement.

“As we move forward, our consumer efforts will focus on how we help our enterprise and service provider customers optimize and expand their offerings for consumers, and help ensure the network’s ability to deliver on those offerings,” Chambers said.

Millions of Flip digital camcorders have been sold around the world.

Relatively cheap at between $130 and $230, they are renowned for being simple and easy to use.

They shoot up to 60 minutes of high-quality video which can be quickly uploaded to the Internet or shared by email.

A key flaw was that smartphones and even Apple’s popular iPods were rapidly enhancing cameras and image-sharing features that undermined any need for Flip type devices.

“Flip largely targeted a gap that was being filled by smartphones like the iPhone and was likely to be displaced by iPods with cameras,” Enderle said. “Clearly, Cisco missed that meeting.”

Flip models upgraded with improvements such as high-definition video made the cameras more expensive, but then pitted the devices against high-quality products from photography equipment titans such as Canon, Sony, and Nikon.

Cisco rightly saw that networking was going to be in the home and that most devices would be networked,” Enderle said of the company’s strategy to diversify. “They got wrong that they needed to actually build the devices.”

Cisco shares shed 0.24 percent to $17.40 in after-hours trading on Wall Street.