Cisco kills the flip camera, consumers ask why

There I was at the San Francisco Giants game the other evening, when my buddy decided to do something a bit silly -- but memorable -- and handed me his little Flip camera. I'm not going to share the YouTube link, but the video is pretty good, considering the lighting was weird and it was a very chaotic environment. There's no way that I would have done nearly as well with my iPhone.

Why am I telling you this? As you likely know, Cisco surprised the world last week with its announcement that it is killing the popular little video cam and, oh yes, firing 550 people. The death of the Flip is a good lesson in how the technology industry really works, and how your interests as a consumer of technology are not always the same as that of Cisco or other Silicon Valley giants.

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But first, some good news. Unlike the void that occurs when your favorite TV program is killed (I'm still mourning the death of Lights Out on FX) the Flip is still around. If you own one, it will remain useful for years, and it appears that Cisco is going to continue support and service for some period. (As I write this, the details have not been announced.)

If you don't own one, there are plenty to be had at Amazon and on eBay, though I'd expect prices to increase as stocks of newly manufactured Flips start to dwindle.

And it turns out that there are a few alternative to the Flip. I haven't had a chance to test these myself, but I've have heard and read good things about a few models by Sony and Toshiba.

• Sony's line of Bloggie cameras start with a basic model and move up in features to include a touchscreen, dual screens on the front and back, and a 3D version. Prices range from $149 for a basic model to $249 for a version that lets you create 3D videos.

• Kodak's Playsport ($127 to $170) sports a rugged design that the company says will resist, dust, water and vibration. Indeed, it's supposed to be waterproof as far below the surface as 10 feet.

That's not to say that personal video cams by other makers aren't up to snuff; I simply haven't checked them out.

Smartphones Really to Blame?

The quick take by a lot of pundits was that the culprit in the death of the Flip was the smartphone. That sounds good, as does the line of thinking that says, people don't want to carry multiple devices, so even if the cameras on the iPhone or Android aren't great, they're plenty good enough.

Well, not exactly. Sales of the Flip remained strong right up until the end. There's some dispute over its share of the camcorder market, with Cisco claiming 35 per cent (according to David Pogue of the New York Times) and various analysts estimating about 17 per cent. In any case, it was the leader of a category that was continuing to grow, albeit not as fast as in the past.

Despite the hoopla about smartphones, there aren't really that many around, at least compared to the more basic cell phones carried by masses of people all over the world. And that means there were still plenty of people who could buy the Flip without feeling like they were duplicating features they already had.

So what was really going on here?

To begin with, innovation in technology is most often the product of entrepreneurial startups. The Flip itself was born in a small office over a San Francisco department store in 2007, and two years later Pure Digital (the company that developed it) was sold to Cisco for $590 million. Now there's the quintessential Silicon Valley success story.

But when Cisco purchased Pure Video, a lot of people around the industry didn't see it as a good fit. Apparently they were right. Cisco wasn't good for the Flip, and the Flip wasn't good for Cisco.

By all accounts, Cisco didn't do nearly enough to improve the product, and sales of competitors were beginning to erode the Flip's dominance. Most surprising to me was that Cisco, which probably knows more about networking than any company in the world, didnt make the Flip Internet ready by building in Wi-Fi capability. Apparently the next rev of the product, which we'll never see, would have included some form of connectivity.

Like a lot of companies that make nearly all of their living selling complex technology to large businesses, Cisco's business model is predicated on high margins. But consumer products don't measure up, their margins are much lower. And with Cisco under pressure from Wall Street to improve earnings and margins, CEO John Chambers needed to make some radical moves. Cisco's consumer's products division got the axe.

The one piece of the puzzle that doesn't quite fit is why Cisco didn't sell the Flip. Surely, someone could have made a go of a product that was pulling in some $400 million a year in revenue.

It could be that Cisco wants to hold on to the technology. Or maybe there's some other reason that a sales doesn't fit its corporate priorities. It doesn't matter. Cisco needed to kill the Flip, and that's a big loss for consumers.

San Francisco journalist Bill Snyder writes frequently about business and technology. He welcomes your comments and suggestions. Reach him at bill.snyder@sbcglobal.net.

Follow Bill Snyder on Twitter @BSnyderSF. Follow everything from CIO.com on Twitter @CIOonline.

Tags business issuesCisco SystemsDigital camcordersconsumer electronics

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Bill Snyder

CIO (US)

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