Thursday, April 14, 2011

Cisco Screws Up Big Time

The Tragic Death of the Flip - NYTimes.com

I thought that maybe, just maybe, they'd learned something from mishandling Linksys.

Cisco is killing the Flip camcorder.

Let’s see if I can get this straight. Only two years ago, Cisco bought Pure Digital, the company that made the Flip, for $590 million. Then, on Tuesday, Cisco announced that it’s shutting down the whole division and laying off 550 people.

We humans are a rational species. Our instinct is to find reasons, to seek patterns where none may exist. In this case, everybody’s first reaction is: “Oh, it’s because of smartphones. Everybody’s shooting video with iPhones nowadays—nobody’s buying Flip camcorders.”

Or, as Gizmodo puts it, “Cisco just axed Flip, yeah, but the blame should be aimed squarely at the smartphone in your pocket.”

Which sounds logical—until you realize there is a far more satisfying explanation.

First, app phones like the iPhone represent only a few percent of cellphone sales. You know who buys app phones? Affluent, East Coast/West Coast, educated, New York Times-reading, Gizmodo-writing Americans.

But most of the world doesn’t buy iPhones. Of the 1 billion cellphones sold annually, a few million are iPhones. The masses still have regular cellphones that don’t capture video, let alone hi-def video. They’re the people who buy Flip camcorders. It’s wayyyyyy too soon for app phones to have killed off the camcorder.

Second, it isn’t true at all that nobody’s buying Flip camcorders. So far, 7 million people have bought them. Only a month ago, I was briefed by a Flip product manager on the newest model, which was to hit the market yesterday. He showed me a graph of the Flip’s sales; Flips now represent an astonishing 35 percent of the camcorder market. They’re the No. 1 bestselling camcorder on Amazon. They’re still selling fast.

Look at it this way: There are plenty of Flip copycats, from Kodak and other companies. They have only a fraction of the Flip’s popularity, but you don’t see them shutting down.
So why did Cisco kill off the flip?

I’ve spoken to a bunch of people in the industry, trying, in my human way, to figure out the logic here. It seems clear that Cisco, whose primary focus is making networking equipment for businesses, was all excited about getting into the consumer electronics game; that’s why it spent $590 million on Flip. But then, as John Chambers, Cisco’s chief executive, put it, the company decided to make “key, targeted moves as we align operations in support of our network-centric platform strategy.”

Which, in English, means, “We had no clue what we were doing.”

So, on the verge of a truly amazing launch of a market shattering new product, simple live streaming, they killed any chance of being consumer oriented.

God knows why, but I bet, despite any and all explanations they may give, Cisco doesn't.
con·cept: Cisco Screws Up Big Time