Cisco Sheds Linksys, Greater Focus On EnterpriseCisco's almost decade-long experiment to create a lasting consumer business has ended.
Following the shutdown of the Flip camera division in 2011, Cisco today announced that it has sold Linksys to Belkin. Cisco paid $500 million for Linksys in 2003 and $590 million for Flip in 2007 and is rumored to have lost more than 75 percent on the original investment with a sale price of Linksys that was rumored to have been in the neighborhood of $230 million.
Cisco's Hilton Romanski described the sale of Linksys as a win-win situation, which is certainly true for Cisco who reportedly has been shopping for a buyer of a business unit that did not make much sense anymore within Cisco since fall of last year. For Belkin, however, the purchase means that the company will own about 30 percent of the consumer networking market.
When Cisco acquired Linksys in 2003, the consumer networking market was just developing with the emergence and popularization of Wi-Fi networks and their natural fir in a time that saw an explosion of broadband network adoption in households. Back in 2003, there were just 55 million broadband Internet connections in the U.S. and only 13 million home networks. Linksys had a 40 percent market share in home networking products when Cisco acquired the company, which for the company was an interesting move.
Analysts questioned the move and Cisco's ability to understand home networking.
"It leaves me scratching my head a little bit. I agree that SOHO is growing, but rarely does a company succeed trying to sell to the enterprise and consumers," said Yankee Group analyst Zeus Kerravala in an interview with InternetNews in 2003. He speculated that Cisco would also use Linksys to drive down prices in enterprise networking products and target Linksys toward telecommuting products. That would have meant that the company could have had an opportunity to translate Linksys' experience to offer cheap products into a market that has a demand for value.
The sale of the company suggests that this opportunity was, ultimately, a bust and Cisco is now focusing much more on its traditional enterprise market.
Wolfgang GruenerWolfgang Gruener is a contributor to Tom's IT Pro. He is currently principal analyst at Ndicio Research, a market analysis firm that focuses on cloud computing and disruptive technologies, and maintains the conceivablytech.com blog. An 18-year veteran in IT journalism and market research, he previously published TG Daily and was managing editor of Tom's Hardware news, which he grew from a link collection in the early 2000s into one of the most comprehensive and trusted technology news sources.
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