Cisco Systems' acquisition of Pure Digital Technologies, maker of the Flip camcorder, has sparked a lot of discussion about the networking giant's intentions. One theory is that Cisco is looking to compete with Apple--especially in the digital living room.
Ben Worthen at The Wall Street Journal surmises:
It isn't a big leap to see Cisco developing a home-media hub that cobbles these pieces together--some sort of device that allows people to upload and watch videos and listen to music throughout their homes. In fact, it looks like a next logical step. Apple has a similar device called Apple TV, which can direct music to a home audio system and videos to a television. It works with Apple's iTunes store, naturally.
All of that is true. Cisco has a lot of living room parts. The cable box (Scientific Atlanta), the router (Linksys), software to bring video conferencing to the home, and now the Flip camcorder.
Worthen connects a few dots and notes that the folks that make the Flip have proven they can create the right gadget at the right time. On that topic definitely read Michael Arrington's history lesson on Pure Digital and how it arrived at the Flip.
While this digital living room scrum is noteworthy--and pretty damn interesting--let's not lose sight of Cisco's big goal. Sell the big honking networking gear that will move all of this video around. Cisco really doesn't care where the video comes from as long as enterprises and consumers move a lot of it over a network increasingly powered by the networking giant's hardware and software.
The only thing Apple and Cisco have in common is that they want to sell you a ton of hardware. Apple sells the fashion statements and Cisco sells most of the stuff you never see in the network, data center and telecom provider. Every once in a while Cisco puts on a nice front end--Telepresence and Flip camcorders--to entice you to use more bandwidth for video.
The living room is only part of the equation for Cisco. In fact, it's only part of the equation for Apple. Both merely see it as an avenue to sell you more hardware. Both companies are pursuing different halo effects.
Here's a visual aid I cooked up to explain Cisco's grand plan (all roads lead to the router, switches and the fancy new servers). Click to expand:
(Credit:
Larry Dignan/ZDNet)
Correction: An earlier version of this story misstated Cisco's yearly earnings.
If you haven't noticed, Cisco Systems, whose products have been used to build the Internet for 20 years, has spent the past 6 years becoming a big player in the consumer electronics market.
While Cisco still generates the bulk of its nearly $40 billion in yearly revenue from selling routers and switches to large companies and Internet service providers, the company has also been pushing into new markets, such as consumer electronics, over the past several years.
Still, most consumers probably have no idea who Cisco is or what it does. Sure, they may have seen those cute "human network" commercials on TV. But other than that, I'd guess the average Joe has no clue what Cisco does.
Some might be familiar with the Linksys brand, which has traditionally sold home networking gear. But Cisco executives say they are on a mission to make Cisco a household name. Not only is the company making a bigger effort to brand its products as Cisco, but it's also busy developing a slew of new products for the consumer market.
And on Thursday the company announced its most aggressive play in the consumer market to date with the $590 million acquisition of Pure Digital Technologies, the maker of the popular Flip Video mini camcorders.
But Pure is by no means the only major acquisition Cisco has made in the consumer market. In fact, the company so far has pretty much built this part of its business through acquisitions. In 2003, it got its start in the competitive CE market with the $500 million acquisition of the home-networking equipment maker Linksys. Then in 2005, it bought Scientific Atlanta, a quasi-consumer electronics company, for $7 billion. Scientific Atlanta makes set-top boxes that Cisco sells to subscription TV providers.
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LAS VEGAS--Before making the new inexpensive mini camcorder it unveiled at CES Wednesday, Sony tried to purchase the category leader, Pure Digital.
Sony Electronics President Stan Glasgow on Wednesday told CNET News that the vastly popular Flip Video camera made by Pure Digital came onto Sony's radar almost two years ago. Glasgow said he knew he wanted Sony to have a product in the category and talked to San Francisco-based Pure Digital about a possible acquisition six months ago.
Without saying how much Pure Digital was asking, Glasgow said it was much more than Sony wanted to pay. The two companies discussed several possible business scenarios, but none worked out.
And even before that, though the U.S. division of Sony really wanted an inexpensive mini camcorder for the U.S. market, the company's Japanese engineers didn't really see the utility of the product category.
Since neither scenario worked out, Sony, a leader in higher-end camera equipment, finally came out its own version of Pure Digital's Flip Mino camera, which uploads video directly to the Web via a USB port.
The Webbie does 1080p MPEG-4 video and shoots in 5 megapixels. The camera will be available in March for about $170.
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