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Cisco’s 10-year Retail Odyssey Is Over: Linksys Sold to Belkin

by David Mercer | 1月 25, 2013

Almost 10 years ago to the month since Cisco announced it would acquire Linksys, the company has told investors it has agreed to sell the unit to Belkin, the privately held home networking specialist based in Los Angeles, CA. Financial terms have not been disclosed. The transaction is expected to close in March 2013.

What is often misunderstood about Cisco’s recent strategic moves, including the closure of its Flip video camera business, is that it still has a strong interest in consumer markets: what has changed, and is now complete through the Linksys divestment, is that Cisco no longer plays directly in the consumer retail space – instead it supports its service provider customers in delivering solutions to end consumers. In that role Cisco still maintains a strong interest in understanding and driving emerging connected consumer technology trends.

The most interesting aspect of the Belkin deal is that Cisco will enter a strategic relationship with Belkin “focused on a variety of initiatives including retail distribution, strategic marketing and products for the service provider market”. My interpretation of this is that Belkin and Cisco will work together to support Cisco’s service provider customers in home networking product development and distribution. Apart from any transaction fees (and its rising share price) this would appear to be the one benefit to Cisco from the Belkin deal.

Cisco’s ten-year odyssey through the world of low margin consumer electronics has been exciting and expensive. In the early days we questioned whether Cisco would become a major consumer technology brand alongside Samsung and Apple. And when the company introduced wireless home audio systems and media hubs in 2009 it looked like things might begin to accelerate. As I wrote at the time, Cisco’s consumer strategy at that time represented a “compelling, yet high risk vision”.

The wireless audio strategy proved to be disastrous, and once the economic downturn hit Cisco’s corporate results the financial markets zoomed in on the weak spots. Linksys’s low margins (relative to Cisco’s traditional enterprise businesses) meant trouble and the writing was on the wall. It was only a matter of time before retail consumer electronics would become an interesting footnote in Cisco’s history.

David Mercer

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