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Why didn't Cisco attempt to sell the Flip unit?

Firing 550 employees making a best-selling product isn't the way to woo Wall Street

By Julie Bort on Tue, 04/12/11 - 5:24pm.

Cisco has two rough quarters, mostly because of execution gaffs in its core switching, routing products, and so the company simply tosses the Flip camera line, and 550 employees, out the door? Flip was never a good fit for Cisco, but the fact that John Chambers didn't attempt to sell the unit speaks as much for his ability to execute through this transition than anything else he's done to date.

FiredFlip wasn't failing, according to the market research, says Stephen Baker, vice president, industry analysis, for NPD, a market research company that tracks camcorder sales. NPD's research places Flip as "far and away the leading consumer video camera company." 2010 unit sales were basically flat over 2009 sales and, although unit sales fell 19% over the year-prior holiday season, this was mostly because Cisco botched the holiday marketing for the device, and competitors arose, Baker says. But demand for camcorders is still growing, he says.

No, John Chambers, the iPhone hasn't killed the camcorder market and won't for many years. Really, not everyone that wants to take videos of their kids wants to buy a smartphone to do it. Smartphones come with high prices, or locked-in contracts and high monthly service bills. Smartphones don't have the storage to replace a video recorder for those times when you want to take hours of video (recording a road trip, or a full day of skiing, or for filming stuff for your blog ... ).

In fact Network World's go-to video device for our reporters on the road has been a Flip camera.

"Today’s news that Cisco will shutter Flip Video is a bad decision on so many levels that it is difficult to fit them all into one discussion," Baker wrote in his blog.

His reaction isn't unique. Kara Swisher from All Things Digital reports that Flip is still the top-selling camcorder in the U.S., with 21.6 percent of the market.

"It’s not entirely clear why Cisco didn’t make more of an effort to sell Flip–I got three calls from big consumer Internet and electronics companies that would have been logical buyers this morning alone, all of whom said they would have seriously considered purchasing the iconic brand."

Dear John, is it possible for you to change your mind? How can a $309 million charge against earnings be a better way to serve your shareholders then selling a company you bought a mere two years ago for $590 million in stock?

John, to be sure, investors, employees, and particularly your enterprise customers, never wanted you to spend your energy and millions of dollars on your ADD-like plan for "30 market adjacencies." If you feel the need to kill stuff to prove you can stop Cisco's slide: kill your Cius tablet, your Umi home videoconferencing system and any other overpriced consumer products that no one uses yet and isn't likely to use in the future. But you won't convince Wall Street that you have a brilliant future by ramming valuable, if misfit, assets down the garbage disposal.

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