Cisco to kill Flip Video, lay off 550 employees

As part of the company's comprehensive plan to align its operations, Cisco has announced that it will exit aspects of its consumer businesses and realign the remaining parts to support four of its five key company priorities: core routing, switching/services, collaboration, architectures, and video. The move is part of a larger strategic decision to trim down the company's money-losing divisions. More specifically, Cisco will:

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

Cisco's choice to dump its Flip Video camera division rather than selling it is a little surprising. It could have retired the brand and sold the technology, but apparently the company deemed this too much effort, or concluded there wouldn't be any interested buyers. Flip Video was the gadget that jump-started the handheld video market a few years ago. The technology was, however, quickly matched by smartphones and other portable video-equipped products.

Cisco anticipates the there will be restructuring charges to its GAAP financial results, with an aggregate pre-tax impact of about $300 million during its fiscal Q3 2011 and Q4 2011. Additionally, the company expects this will result in a reduction of approximately 550 employees in the latter quarter. In October 2010, Cisco employed 70,714 individuals around the world, meaning that it is axing less than 1 percent of its work force. Still, our hearts go out to those affected.

"We are making key, targeted moves as we align operations in support of our network-centric platform strategy," John Chambers, Cisco chairman and CEO, 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."