Spin-Off Doctors

A story broke today that the rumor mill has Cisco is considering spinning off the Linksys brand and perhaps even Webex as well.  The majority of response that I’ve seen from my peers ranged from pleasure to downright cheering.  It seems that people have pinned a lot of the ills that have affected Cisco recently on Acquisition Fever.  The fingers are firmly pointed at Flip and Linksys, and with Flip going the way of the dodo last month, Linksys remains as the demon of Cisco’s lack of focus.

I happen to agree with people that say that Linksys has caused Cisco to lose it’s way.  The Linksys acquisition was the point of the spear in Cisco’s drive to launch itself down into the consumer market.  John Chambers has always said that if Cisco can’t move into a market and be the best, they’ll buy someone and make them the best.  So it was with Linksys.  By snapping up a major player in the consumer market, Cisco could bring its guns to bear on a large base of potential customers.  I think that Cisco felt they had the enterprise market wrapped up tight and that those customers would see the Cisco name on a router in their local big box retailer and, just like Pavlov, they’d rush right out and buy it.  Two years ago, I remember seeing a news piece stating that Chambers was even going to retire the Linksys name and instead put the vaunted Cisco badge on all their products.  That never came to pass, and I think that shows what truly is behind the problems with a large company like Cisco playing down to the consumer.

When I walk into my local retailer, I see lots of boxes on the shelves with names like D-Link, Netgear, and Linksys.  I even see a lot of rebranded generic devices built from the cheapest parts available and graced with names like Rocketfish or CompUSA.  These are the products that consumers look for when they go to Best Buy or OfficeMAX.  They buy whatever is on sale or whatever the guy in the solid colored shirt recommends.  There isn’t any brand loyalty at the bottom of the totem pole.  I bought a very cheap CompUSA wireless router once upon a time just so my laptop could connect from the living room.  It lasted me about a year.  Once it died, I didn’t dig out my support contract and get a replacement unit from San Jose.  I just went down to Walmart and bought a replacement.  I think it’s much the same for customers the world over.  Consumer technology is mostly disposable to them.  There’s not much mission-critical equipment in the average house, so when something dies, it’s usually easier to replace it with a new gadget than it is shipping it off and waiting to get the same one back.  Customers don’t want maintenance contracts and next-business day support.  It’s dog-eat-dog down at the bottom and every penny you can squeeze out of your product is a penny you can put in your piggy bank.  No R&D, no investment in the future.  Just cheap circuit boards and minimal packaging with crappy instructions.

When Cisco finally found this out sometime late last year, it only made sense that they needed to start moving away from the consumer market.  The first to go was the ümi, Cisco’s failed foray into consumer Telepresence.  The average consumer doesn’t want to spend $500 for a video conferencing unit only to have to turn around and pay $50/month to make it work.  Flip was next to go, as Cisco never truly found a way to integrate it into their business model.  Other companies started doing it cheaper and better than Flip, and when the headsman’s axe fell, there were no survivors.  Linksys being spun off would give Cisco some breathing room in the low end of the market.  This would be key, since HP and Juniper are starting to take big bites out of the enterprise space Cisco has been so dominant in for years.  They need to leave the unprofitable consumer space to make up ground in their core business, and they’ve said as much recently.

Webex is an interesting challenge.  Most people that use it love it.  It’s much better than Cisco’s own MeetingPlace offerings, so much so that Cisco dumped their licensing deal with Adobe and now uses Webex for everything from product launches to TAC support calls.  It would seem the Webex integrates very tightly into the collaboration offerings that Cisco is touting.  I’ve heard from some insiders though that the the Webex acquisition was a nightmare that never seemed to end.  Cisco touted the fact that it took them months to close the Scientific Atlanta purchase (one that still baffles me to this day) and closed on Webex in a matter of weeks.  However, I’ve been told that the Webex people never really integrated well with Cisco corporate.  There was a lot of infighting amongst the teams, and in fact several pipeline deals were being closed with nary a mention of Cisco.  It was almost as if the Webex people forgot who was purchasing whom, and the antagonism was palpable.  It wasn’t until a senior VP came into the Webex team and started canning the unruly people left and right that the message came across crystal clear – Webex is now a part of Cisco, not the other way around.

If the idea that Webex is still an autonomous unit under the Cisco umbrella is still pervasive among the Webex team, it might make sense for Cisco to spin off its problem child and just license the technology for its collaboration efforts going forward.  It almost seems that way today, with the Webex platforms being offered in a totally different manner from Cisco’s other product lines.  There have been some false starts in trying to leverage the cloud-based software as a service (SaaS) opportunites the Webex could offer, like Webex Mail.  I think Cisco isn’t for sure how to make Webex work outside of their web meeting product and rather than let that technology wither and die on the vine, it might be better to release it back into the wild and let it find it’s own way.

Tom’s Take

Cisco has already said that they are getting back to basics and concentrating on their core strategies.  They also said to expect some job cuts and the reduction of product lines.  People were shocked when Flip was shut down, but I think that’s the tip of the iceberg here.  Spinning Linksys into a separate company that can be more agile and focus in on the consumer and small business markets is an outstanding idea.  It gives the Linksys team the ability to stay competitive in their primary area of business without feeling the pressure from their corporate overlords to make money hand over fist.  At the same time, the rumor to spin off Webex is shocking to most, as the service is beloved by all of its users and no doubt will flourish in any form.  I think this is more of a culture clash between old-guard Cisco and the Webex team.  The only real way to sort this mess out is to let them go their separate ways and maybe one day they can hang out again as just friends.  Cost cutting and retrenching of your product lines is never a fun task, and it usually calls out the wolves ready to decry your fall from grace.  However, in the case of Cisco I think that spinning off these clunkers is just what the doctor ordered.

3 thoughts on “Spin-Off Doctors

  1. Being a UC nerd for the last few years the WebEx offering has been a PITA when selling Cisco’s collaboration offerings. With the latest version of WebEx Connect with the UCM integration it was staring to look like a cohesive solution, but some customers just are not interested in SaaS.

    When they dropped Meeting Place Express and left customers with no options other than WebEx SaaS I did quite a few OCS 2007 R2 Live Meeting integrations.

  2. I agree with most of your points. Except that Cisco needs to get rid of video as well.

    While its true that the Internet will have some large percentage of traffic as video, Cisco’s business is in transporting the packets and frame, not the creation of video content.

    Throw out the Tandberg and other video gewgaws and focus on the core business. Stop trying to associate with hookers and coke dealers and do business. Focus on customers who make networks, the rest is someone else’s problem.


  3. Pingback: Lightening The Linksys Load | The Networking Nerd

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