Cisco Does the Flip

Well, once again it appears my attempt to be an early adopter of a new gadget has come up short. Somewhere in my desk drawer is a first-generation Flip mini video recorder. I bought it years ago. But never could figure out a reason to use it.

But hey. It was a hot toy and not too expensive relative to some of the other gadgets I have sitting around in the dark corners of my office, garage and so on. And I really don’t have much else to occupy large chunks of my time these days. So the notion of creating a video of dogs peeing on my lawn or something equally dramatic that would go viral on YouTube had some initial appeal. Fail.

Oops. I digress as usual.

Anyway, Cisco ended up buying Pure Digital, the maker of the Flip camera, for $590 million in 2009 — most likely right at the top of the camera’s popularity and hold on the market. And that might be a cautionary tale for the gang at Facebook and Twitter, where valuations are being talked about in the billions, not millions. But where technology and customer trends change quickly these days.

Here’s an interesting perspective from an article in the NYT, “For Flip Video Camera, Four Years From Hot Start-Up to Obsolete“:

It was one of the great tech start-up success stories of the last decade.

The Flip video camera, conceived by a few entrepreneurs in an office above Gump’s department store in San Francisco, went on sale in 2007, and quickly dominated the camcorder market.

The start-up sold two million of the pocket-size, easy-to-use cameras in the first two years. Then, in 2009, the founders cashed out and sold to Cisco Systems, the computer networking giant, for $590 million.

On Tuesday, Cisco announced it was shutting down its Flip video camera division.

Even in the life cycle of the tech world, this is fast.

From the outset, the acquisition was an odd fit for Cisco, which is known for its enterprise networking services. To some analysts, the decision to shutter Flip was an admission by Cisco that it made a mistake.

“Cisco was swayed by the sexiness of selling to the consumer,” said Mo Koyfman, a principal at Spark Capital, a Boston venture capital firm. “They’re not wired to do it themselves, so they do it by acquisition. Flip was one of the most visible targets out there. But it’s really hard to turn an elephant into a horse. Cisco’s an elephant.”

But the rapid rise, and now demise, of Flip is also a vivid illustration of the ferocious metabolism of the consumer marketplace and of the smartphone’s power to destroy other gadgets.

“It was unusually fast,” said Brent Bracelin, an analyst with Pacific Crest Securities. “It’s a testament to the pace of innovation in consumer electronics and smartphone technology. More and more functionality is being integrated into smartphones.”

The rapid innovation of smartphones, he said, is “one of the most disruptive trends we’ve seen.”

As newer and faster technologies beget newer and faster technologies, consumers move on to the next big thing with alacrity. In four years, Flip has gone from start-up, to dominant camcorder maker, to defunct. It took I.B.M. about four years just to reach dominance with its PC in the early 1980s. The iPad is only one year old.

Just as the Flip was reaching its zenith, the smartphone was gaining traction among consumers. With its versatility in recording video and still images, as well as its ability to perform myriad other functions, the smartphone has since proved to be a far more desirable product than a single-function device like the Flip.

This is also a story about Cisco — and other large dinosaur corporations that want to play with the start-ups. And full disclosure: I’ve been a long-suffering Cisco shareholder, holding a modest number of shares that I managed to acquire at the top of the technology boom (and subsequent bust) more than a decade ago.

And Cisco — and its CEO, the highly paid and universally admired by the lamestream media “Cisco Kid” John Chambers — have really been pathetic performers and returners of shareholder value (see NYT “Cisco Shareholders Are Due to Rise Up“) during the past decade. So it doesn’t surprise me that Chambers and crew managed to screw up the Flip.

But it did surprise at least some that Cisco had to kill the Flip. Here’s from CNET News, “Why Cisco killed the Flip mini camcorder“:

It’s easy to understand why Internet infrastructure giant Cisco Systems needed to get out of the consumer electronics business, but did it have to send a popular product, like to the Flip camcorder, to an early grave?

Cisco on Tuesday announced that it will stop making the Flip camera, a popular pocket-sized video camera it bought only a couple of years ago from a company called Pure Digital. The reason? The company said it is strategically realigning its business to focus on selling its core products.

OK. Now we’re getting somewhere. It must be one of those strategic vision things that the corporate bigwigs like Chambers are always articulating. Here’s from the CNET report:
“We are making key, targeted moves as we align operations in support of our network-centric platform strategy,” Cisco CEO John Chambers said in a statement. “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.”
Dude, I believe we were talking here about a small video recorder. Maybe this strategic vision thing isn’t all that it’s cracked up to be. Or maybe it explains why Cisco is such a laggard.
Anyway, maybe Chambers should have used a Flip camera and recorded that statement on YouTube.
What a hoot.

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