January 25, 2013, 8:35 AM — Cisco Systems' sale of its home networking business to Belkin International marks the end of a 10-year odyssey through the world of consumer products, but the company plans to keep reaching consumers through their carriers and cable companies.
Belkin announced on Thursday that it would buy Cisco's Home Networking Business Unit, including its Linksys brand, for an undisclosed sum. The privately held maker of networking gear, peripherals and accessories plans to fold Linksys' employees and products into its operations while keeping the Linksys brand alive.
The deal, which is expected to close in March, has been in the cards since Cisco's shutdown of its Flip video camera business in early 2011. The company made that move as it kicked off a major reorganization in response to disappointing business results. Since then, Cisco has been sharpening its focus on enterprises and service providers, and the writing has been on the wall for the consumer business. Next Thursday, the company will shut down the short-lived home telepresence service it offered in conjunction with its already-discontinued Umi device.
Yet despite charting a course for leadership in IT systems, software and services, Cisco isn't completely leaving behind home networking and the burgeoning use of online video and other applications. Instead, the company is addressing the home indirectly through service providers, the kind of large, established enterprise customer it understands best.
Cisco already had strikes against it as a consumer products company when it acquired Linksys, a successful home networking specialist, in 2003, industry analysts said.
For one thing, Cisco builds most of its businesses around solid profit margins and maintaining market leadership over the long term, the hallmarks of product lines that are typically sold to top IT executives. It takes a different mindset to capture and keep fickle consumers, said Zeus Kerravala of ZK Research, a longtime Cisco watcher.
"It's a very rare company that can actually have a strong consumer brand and corporate brand," Kerravala said. Dell and Hewlett-Packard, for example, are struggling in both arenas, he said. "For Cisco to have done that, I think, would have required a much bigger shift in company strategy than they were willing to do."