Cisco’s $590 million purchase of Pure Digital, the makers of the Flip digital video recorders, is interesting for a number of reasons. The networking giant may have paid too much, according to Om Malik’s analysis, although in the context of Cisco it’s not a lot of money. Pure Digital’s years of failure before hitting on something good also makes a good story, as TechCrunch explains. What strikes me, however, is how totally counter-cultural a consumer product like the Flip is for Cisco.
I know that Cisco has dipped some cautious limbs into consumer markets, with acquisitions of Linksys and Scientific Atlanta. But as The New York Times reports, consumer products only amount to 5 per cent of Cisco’s revenues. Whatever spin might come out of Cisco about creating new avenues for growth, or boosting Internet traffic, which will require more Cisco routers and networking hardware, strikes me as rather feeble rationalization.
Intel has gone down this path periodically over the years. Its venture fund in the dotcom boom years invested in a bunch of start-ups that would supposedly increase the need for more powerful processors. The mother ship itself has done odd things like market a digital microscope. Unsurprisingly, none of it stuck. Intel is a hard-edged, engineering-dominated company. It’s not cut out for consumer stuff, although it has been legendarily successful at making consumer’s recognize its brand — which is a different thing entirely.
I’d wager Cisco will be the same. Sure, Flip and Linksys may thrive and even continue to innovate within the large corporate embrace. But senior management time, energy and resources will continue to go to the lucrative networking products that no consumer will ever recognize. And the company will be none the worse for that.