A report by Bloomberg this morning has revealed that Cisco is looking to offload its home networking company Linksys as part of a broader strategy aimed at dumping consumer markets altogether and focusing entirely on its higher-margin enterprise products.
Cisco has reportedly hired the services of Barclays to find a buyer for its Linksys division, which it acquired for $500 million back in 2003. Since that time, all Linksys products have been branded “Linksys by Cisco”, as the parent company decided to reserve its main branding strictly for its enterprise offerings.
The Wikibon Project’s chief analyst Stu Miniman says that today’s move isn’t a major surprise, given that Cisco has failed miserably with its consumer ventures. Miniman cites the example of Cisco’s acquisition of Flip video cameras in 2009 as evidence of this. Even though Flip’s HD cameras had a sizeable market at the time it was purchased, and were considered to have great potential, Cisco took the decision to discontinue sales of these products just two years later.
“Cisco has failed to capitalize on its consumer brands,” explained Miniman.
“Flip was beloved by its users and Cisco killed the product line. Cisco had hoped to leverage scientific Atlantic and Linksys to broaden its addressable market, but has had to scrap much of that and focus on core markets, especially data center. Linksys is still a solid product line, but not synergistic with the rest of Cisco.”
Cisco itself has openly stated that it doesn’t have much interest in pursuing consumer markets, announcing in 2011 that it would focus on five specific niches instead, namely “core routing; switching and services; collaboration; architectures; and video”.
No prospective buyers have been put forward to take Linksys off Cisco’s hands just yet, although it has been reported elsewhere that the company may try to solicit bids from TV manufacturers that are interested in its technology and brand.
As for the asking price, Bloomberg suggests that Cisco will be unlikely to recoup the $500 million investment it its router business nine years ago, simply because it isn’t all that profitable anymore. Even so, this probably won’t cause too much concern for Cisco’s chiefs given that this low profitability is precisely the reason why it wants to exit the consumer market.