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Cisco's logo. Click here to visit the Cisco website! End of the road for Flip, as Cisco restructures
(Friday, April 15, 2011 - 12:24 EDT)

Cisco Systems Inc. has announced plans to restructure its business, and in the process looks to have consigned a digital imaging pioneer to the history books.

As part of the restructuring plan, Cisco will be discontinuing its Flip-branded flash memory camcorders, a product line that the company took onboard with its purchase of San Francisco-based Pure Digital Technologies just two years ago.

Pure Digital first came to our attention in mid-2003, when they launched the US market's first "single use" digital camera. In essence, the plan was to provide a reusable camera, suitable for rental to the public, and including no standard connectivity or removable memory so as to ensure customers had to return to the retailer when they wanted their prints. Apparently based on an existing model from Taiwan's Primax Electronics Ltd., the Dakota Digital camera reached the US market through a partnership with Ritz Camera Centers. Predictably, within a few months hackers had discovered how to offload their photos and reuse the camera, damaging the business model, and this (coupled with an uninspired design that lacked any way to review images) conspired to bring the Dakota Digital's life to a premature end. Pure Digital returned 18 months later, this time in cooperation with pharmacy chains CVS and Rite Aid, and offering a "single use" camcorder. The concept was similar to that of the still camera, although there was now a small LCD display included in the design, which was hacked almost immediately. A game of cat and mouse followed, with Pure Digital issuing updated versions of the CVS / Rite Aid camcorders, and hackers figuring out new ways to circumvent the security changes in each new variant. By 2009, these rental camcorders had been discontinued.

In the meantime, perhaps having learned important lessons about the difficulties of offering rental products -- not to mention the demand for a low-cost camcorder -- Pure Digital had released a precursor to the product line for which it would become best known. The Pure Digital Point & Shoot Video Camcorder, like its CVS / Rite Aid cousins, could be taken to either chain to have its contents offloaded. Unlike those models, though, the new model also included a standard USB jack which folded out of the side of the camcorder's body, allowing it to be directly connected to the user's computer, without any hacking. Priced at $130, the Point & Shoot Video Camcorder didn't exactly offer stellar video quality, but that wasn't the point. The VGA video it captured was "good enough", and it was relatively affordable, compact, and simple to use. The design showed the way forward for the company, which quickly launched a followup, simultaneously introducing the catchy name by which all of Pure Digital's subsequent products would be known -- "Flip".

Available from May 2007, the Flip Video piggybacked on the burgeoning popularity of video sharing sites, led by Google's recent acquisition, YouTube. As with all of the subsequent Flip models, the Flip Video had a simple fixed focus, fixed focal length lens. Later models added high definition 720p video capture, and gradually increased the memory to as high as 8GB, while a separate Flip Video Mino line focused on reducing the camcorder's body size. Overall, though, the Flip was surprisingly little-changed throughout its lifetime, with Pure Digital--and later, Cisco, after the company was acquired in early 2009--instead emphasising fashion-friendly skinnable exteriors, marketing tie-ins, and attention-grabbing giveaways such as that at 2008's YouTube Live event, where audience members were provided with Flip Mino camcorders on which to capture their memories.

Unfortunately for Cisco, the world was fast changing around its Flip products. With even 720p high definition video having very low resolution compared to that of still imaging, the relatively low quality lenses of camera phones weren't a limiting factor. They did however offer an advantage in terms of instant gratification, being able to upload clips directly from the phone to popular video sharing sites, and the Flip series never attempted to challenge in this area. Nor did consumers capturing video with their cell phone need to carry an extra gadget. The result was dwindling sales for the Flip products, and despite having paid some US$590 million to purchase Flip only two years ago, that portion of Cisco's business has now been shuttered.

Diehard fans of Flip's products will likely mourn its passing, but chances are that many of Flip's one-time customers won't even notice the news, having long ago switched to capturing video with their cell phones.

Original Source Press Release:

Cisco Restructures Consumer Business

SAN JOSE, Calif. - April 12, 2011 - As part of the company's comprehensive plan to align its operations, Cisco today announced that it will exit aspects of its consumer businesses and realign the remaining consumer business to support four of its five key company priorities -- core routing, switching and services; collaboration; architectures; and video. As part of its plan, Cisco will:

  • Close down its Flip business and support current FlipShare customers and partners with a transition plan.

  • Refocus Cisco's Home Networking business for greater profitability and connection to the company's core networking infrastructure as the network expands into a video platform in the home. These industry-leading products will continue to be available through retail channels.

  • Integrate Cisco umi into the company's Business TelePresence product line and operate through an enterprise and service provider go-to-market model, consistent with existing business TelePresence efforts.

  • Assess core video technology integration of Cisco's Eos media solutions business or other market opportunities for this business.

"We are making key, targeted moves as we align operations in support of our network-centric platform strategy," said John Chambers, Cisco chairman and CEO. "As we move forward, our consumer efforts will focus on how we help our enterprise and service provider customers optimize and expand their offerings for consumers, and help ensure the network's ability to deliver on those offerings."

In connection with the changes to the consumer business, it is anticipated that Cisco will recognize restructuring charges to its GAAP financial results, with an aggregate pre-tax impact not expected to exceed $300 million during the third and fourth quarters of fiscal 2011. The charges will be disclosed in upcoming earnings conference calls and quarterly Form 10-Q filings. Additionally, the company expects this will result in a reduction of approximately 550 employees in the fourth quarter of fiscal 2011.

About Cisco
Cisco, (NASDAQ: CSCO), is the worldwide leader in networking that transforms how people connect, communicate and collaborate. Information about Cisco can be found at http://www.cisco.com. For ongoing news, please go tohttp://newsroom.cisco.com.

Forward-Looking Statements
This press release may be deemed to contain forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including the company's plan to align its operations in support of its network-centric platform strategy, Cisco's consumer focus going forward, the maximum size of the anticipated restructuring charges, and expected employee reductions. Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual future events or results due to a variety of factors, including, among other things, how well we execute on our strategy and operating plans, business and economic conditions and growth trends in the networking industry, customer markets and various geographic regions, global economic conditions and uncertainties in the geopolitical environment and other risk factors set forth in Cisco's most recent reports on Form 10-K and Form 10-Q. Any forward-looking statements in this release are based on limited information currently available to Cisco, which is subject to change, and Cisco will not necessarily update the information.

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