Cisco Kills the Flip Camera, Consumers Ask Why

The death of the Flip is a good lesson in how the technology industry really works, and how your interests as a consumer of technology are not always the same as that of Cisco or other Silicon Valley giants.

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So what was really going on here?

To begin with, innovation in technology is most often the product of entrepreneurial startups. The Flip itself was born in a small office over a San Francisco department store in 2007, and two years later Pure Digital (the company that developed it) was sold to Cisco for $590 million. Now there's the quintessential Silicon Valley success story.

But when Cisco purchased Pure Video, a lot of people around the industry didn't see it as a good fit. Apparently they were right. Cisco wasn't good for the Flip, and the Flip wasn't good for Cisco.

By all accounts, Cisco didn't do nearly enough to improve the product, and sales of competitors were beginning to erode the Flip's dominance. Most surprising to me was that Cisco, which probably knows more about networking than any company in the world, didnt make the Flip Internet ready by building in Wi-Fi capability. Apparently the next rev of the product, which we'll never see, would have included some form of connectivity.

Like a lot of companies that make nearly all of their living selling complex technology to large businesses, Cisco's business model is predicated on high margins. But consumer products don't measure up, their margins are much lower. And with Cisco under pressure from Wall Street to improve earnings and margins, CEO John Chambers needed to make some radical moves. Cisco's consumer's products division got the axe.

The one piece of the puzzle that doesnt quite fit is why Cisco didn't sell the Flip. Surely, someone could have made a go of a product that was pulling in some $400 million a year in revenue.

It could be that Cisco wants to hold on to the technology. Or maybe there's some other reason that a sales doesn't fit its corporate priorities. It doesn't matter. Cisco needed to kill the Flip, and that's a big loss for consumers.

San Francisco journalist Bill Snyder writes frequently about business and technology. He welcomes your comments and suggestions. Reach him at bill.snyder@sbcglobal.net.

Follow Bill Snyder on Twitter @BSnyderSF. Follow everything from CIO.com on Twitter @CIOonline.

Copyright © 2011 IDG Communications, Inc.

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