Update: See comment below on Cisco entering the Compute Server Business.
Cisco is thought of as a successful network equipment vendor selling switches and routers to enterprise customers and service providers. The company also sells (Linksys) WiFi routers and (Scientific Atlanta) set top boxes for use within homes. Sensing a new opportunity, the company now wants to make significant inroads in the digital home based entertainment market.
At CES next week in Las Vegas, Cisco will announce a new line of products, including a digital stereo system that is meant to move music wirelessly around a house. Sometime later in the year, the company plans to introduce a residential video conferencing system using camera’s and high-definition televisions (HD TVs). The quality will certainly be much better than today’s web cam technology, but will consumers be willing to pay for it? Cisco believes that in the near future, all TVs will be connected to home networks, but they don’t say how (we think it will be wirelessly-perhaps via IEEE 802.11n).
Cisco started to pursue the home networking market with Linksys WiFi routers and by acquiring set top box manufacturer Scientific Atlanta which is sold to MSOs. But the CES announcement is an attempt at a much bigger penetration of the home electronics market. Cisco hopes that people will want to use a version of its corporate videoconferencing system (Telepresence) for video chats with their friends and family over their HDTVs.
Opinion: We think it will be very difficult for Cisco to compete with brand name home elecrtronics companies like Sony, Panasonic, Apple, Samsung and many others. Considering the global economic contraction and its negative effect on consumer discretionary spending, this could be quite a challenge. Do you think they can compete? Do you think their timing is right?
References:
With a Digital Stereo, Cisco Systems Is Starting a Push Into Home Electronics
http://www.nytimes.com/2008/12/29/technology/29cisco.html?_r=1&ref=technology
Cisco tests out home electronics market
http://blogs.moneycentral.msn.com/topstocks/archive/2008/12/29/cisco-tests-out-home-electronics-market.aspx
Postscript: Have you noticed the raft of new Cisco TV commercials for Telepresence and home networking? They are evidently directed at consumers to build brand awareness.
5 replies on “Will Cisco Succeed in the Consumer Electronics Business?”
I have read this post. This is very much true. Even I own a blog account on video conferencing. Video conferencing is indeed a great innovation in technology and communications. One day video conferencing will be like an ordinary house-hold item in the next 5-10 years.I will mention your post in my blog.
In addition to consumer electronics, Cisco now is entering the fiercely competitive compute server biz. Seems to be an extension of their Data Center virtualization and connectivity product initiatives. Have they become the masters of the virtualization universe?
NYTimes: Cisco Plans Big Push Into Server Market
The product to be announced soon — a server computer equipped with sophisticated virtualization software — is a bold but risky move by Cisco into an unfamiliar, intensely competitive market that typically produces far lower profits than Cisco makes from network gear. But it reflects the company’s ambition to grow beyond its roots as the so-called plumber of the Internet to offer everything from instant messaging software to digital stereos. The company is on a collision course with traditional partners like Hewlett-Packard and I.B.M which hold dominant positions in the server market. http://www.nytimes.com/2009/01/20/technology/companies/20cisco.html?_r=1&ref=business
Our take: Cisco wants to diversify OUT of the no growth networking market into tangential markets which extends the company’s presence. They perceive home electronics as an extension of home networking/WiFi as per their CES announcement. Now they see compute servers as an extension of the virtual data center. Will they succeed?…..It seems to be a stretch and a risky bet for a company noted for enterprise networking and selling routers and switches to network operators and ISPs
Cisco wants to enable people to live a connected life that is more personal, more social and more visual by utilizing the network as the platform for easily sharing experiences across devices, locations and applications. To that end Cisco plans to build intelligent end to end media ready home networks that extend from the content source to the consumer.
At an upcoming webinar for Industry Analysts, Cisco executives will share their consumer vision, strategy and discuss some of the products and solutions recently announced at CES 2009.
Here’s what CNET writes about Cisco in consumer electronics:
http://news.cnet.com/wireless/?keyword=Cisco+Systems
According to KCBS radio, Cisco terminated 250 people yesterday, but it was called a “restructuring” rather than a layoff.
http://www.kcbs.com/Cisco-Releases-250-Bay-Area-Employees/3917792
According to the San Jose Mercury News, Cisco Systems announced earlier this month that the company would be slashing up to 2,000 positions following a 27 percent year-over-year drop in profit during the second quarter.
Will Cisco be able to harness the resources needed to compete in new markets when it is jettisoning employees?