Flip Video: Between a Rock and a Hard Place

Analyst Insight by Wee Teck Loo.

Cisco Systems Inc announced that it will restructure its consumer business as Cisco strives to cut its expenses by half in 2011. The biggest casualty is its Flip Video business as Cisco decides to close down the division.

Cisco bought Flip Video from Pure Digital Technologies in March 2009 and earmarked Flip Video as the centre-piece of its business strategy to enter the consumer market. The issue Cisco finds itself faced with now is that the world has moved on since it acquired Flip.

Smartphone craze hit the world in 2010, making Flip Video redundant. Smartphone users can just record and upload the videos immediately onto Facebook or YouTube as most consumers will have internet data plans bundled as part of their mobile contract. Flip Video users will still need to access the internet via computers to share their recordings online.

On the other end of the spectrum, digital cameras are enjoying a revival and are capable of much better video and photo taking capabilities. Entry compact digital camera retail prices have fallen to US$100, matching the price of Flip Video which hastened its demise.

Cisco’s exit from the consumer domain will affect its ego more than its revenue and serves as a stark reminder that consumer electronics is a totally different world from corporate sales where Cisco dominates.