Cisco to overhaul troubled consumer products unit
Cisco Systems Inc. (CSCO-Q) will shut down its Flip video camera business in an overhaul of its troubled consumer products business, following chief John Chambers' recent admission that the company had lost its way.
Cisco's consumer division, in particular, has been a target of criticism by analysts, who have said it strays too far from the company's main business of selling routers and switches to the technology and telecommunications industries.
Cisco shares have lost a third of their value over the past year. Including that slide, Cisco has lost slightly more than half its value since the start of 2001, when it was almost worth $40 a share US.
Chambers promised last week to make tough decisions about the direction of the company. Tuesday's news appears to be his first move. Among the steps, Cisco plans to shut down the Flip business and combine its Umi home teleconferencing service with its TelePresence business product.
The company also said it would cut 550 jobs in the fiscal fourth quarter, accounting for less than 1 percent of its workforce of about 73,000 employees.
Cisco originally bought the Flip business for $590 million in 2009.
The company plans to take a pre-tax charge of about $300 million for the overhaul. The charge is expected to be recognized in the third and fourth quarters of fiscal 2011.
Chambers has previously called on the company to focus on five areas: routing, switching and services; collaboration; data center virtualization; architectures; and video.