Cisco diving into consumer electronics

Cisco is planning to enter the consumer electronics business, according to Monday's edition of the Financial Times newspaper.

A newspaper report Monday that Cisco Systems plans to enter the mainstream consumer electronics market is only the latest sign of its ambitions to expand beyond computer networking equipment.

The Financial Times reported that Cisco plans to do battle with Sony, Samsung Electronics and others by selling products including radios, phones and home theater systems, sold mostly through its Linksys home networks division. The paper cited comments from Charles Giancarlo, Cisco's chief development officer and the president of Linksys.

However, offering other networked electronics gear that can download content and distribute it around the home would only build on a strategy already under way.

In July last year, for example, it paid US$61 million to buy Kiss Technology, a Danish company that makes DVD players and other products that can connect to Wi-Fi and Ethernet networks. Linksys launched a product from that acquisition at the Consumer Electronics Show earlier this month, the DP-600 DVD player, which it plans to ship by the end of March.

Other Linksys products announced at CES included the Wireless-G Music Bridge, for transferring audio from a PC to a stereo or other speaker system elsewhere in the house.

Linksys could use technology from its Kiss acquisition to make other networked consumer devices, Giancarlo told the Financial Times.

Cisco apparently hopes that, in a world where consumer electronics gear is increasingly being linked together to share content, its networking expertise will help it to compete with the established consumer electronics giants.

"Consumer electronics companies have been able to compete on a stand-alone device, but the dynamics of the market are changing," Giancarlo said. "The internet and new networking requirements are enough of a disrupter for us to enter a new market."

Cisco's close relationship with content providers such as Yahoo could also boost its consumer efforts, according to Giancarlo.

The Sonys of the world, meanwhile, will be relying on their established brands, innovation and customer loyalty to maintain their positions.

Also significant to Cisco's consumer plans is its proposed acquisition of TV set-top-box maker Scientific-Atlanta for US$6.9 billion, announced in November. Cisco sees future TV services being delivered over IP networks, where much of its business is based, and wants to offer service providers an end-to-end menu of products for delivering IP TV and bundled voice, video and data services.

"As consumers demand more sophisticated information and entertainment services in their home, tightly coupled applications, devices and networks will be essential," Cisco President and Chief Executive Officer John Chambers said when the Scientific Atlanta deal was announced.

Only around 4 percent of Cisco's revenue comes from sales to consumers today, but the consumer group has the potential for the fastest growth, Chambers said in an interview last week with IDG's Network World magazine.

Research company In-Stat is also bullish. It estimates that consumers worldwide will spend US$16.1 billion on networked home entertainment products by 2009, more than a fourfold increase over the US$3.9 billion they spent last year.

Cisco executives weren't available Monday to provide an update on their consumer plans.

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James Niccolai

IDG News Service
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