Cisco's Flip business closed; 550 workers to be cut

Umi home telepresence shifts into business unit as part of consumer reforms at the networking giant

Cisco announced Tuesday that it is killing the Flip portable video camera business in a restructuring move that will include exiting other parts of Cisco's consumer businesses and reducing the company's headcount by 550 workers.

Consumer products have been a recent drain on Cisco, a $40 billion company that dominates the switching and routing world. Cisco executives had ambitious plans for video, including consumer video and the Flip, beginning three years ago , even though it was considered an unusual move for the infrastructure maker to plunge into the consumer world.

Last week, CEO John Chambers said the company needs to cut expenses by half, three days after issuing a candid memo to Cisco 's 73,000 employees about coming reforms.

Tuesday's announcement referred to Chamber's plan to re-focus Cisco on five key areas: core routing, switching and services; collaboration; architectures; video; and data center products.

The decision to exit some consumer businesses means that the remaining consumer areas will be taken over by four of the five priority areas except for data center. The move will result in a $300 million charge in the third and fourth quarters of 2011 with the 550 job reductions coming in the fourth quarter, Cisco said in a statement.

Cisco said FlipShare customers and partners will be supported with a transition plan, but gave no details.

Cisco's Home Networking business will be refocused, according to the statement, "for greater profitability and connection to the company's core networking infrastructure." Products in that area will still be sold in retail channels.

Cisco's Umi home telepresence line will be integrated into Cisco's Business TelePresence line and will be sold through an enterprise and service provider approach, although Cisco didn't elaborate on how that would work. Cisco also didn't say whether Umi consumer products would continue to be sold.

Cisco said it would "assess" whether to integrate the Eos media solutions business or find other market opportunities for that business.

Ironically, video is one of Cisco's five priorities in its coming realignment, but apparently not on the consumer side. "We are making key, targeted moves as we align operations in support of our network-centric platform strategy," Chambers said in the statement.

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

A year ago, Cisco was supporting and touting upgrades to the Flip line, including adding HD capabilities to the camera and running Web advertising promoting the product. There were even rumors that a Wi-Fi-ready Flip would be sold, but that has not materialized, and the duration of future Flip support is uncertain.

Umi home telepresence has been the subject of repeated national TV advertising by Cisco although analysts have not described much success in sales.

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