Cisco is selling off its Linksys home networking division to rival Belkin. Why is Cisco walking away from consumer brands at a time when the influence of consumer technology on enterprise is arguably bigger than ever?
Cisco picture by Adriano Castelli from Shutterstock
Terms of the deal haven't been disclosed, and the transaction isn't expected to be finalised until March. Belkin has said it will maintain the Linksys brand and will honour existing warranties and support.
As a result, that change might not make much difference to the behaviour of individual buyers. Customers who have previously purchased Linksys gear because the developments teams have (in theory) access to Cisco's networking expertise may now be drawn to other brands. What's arguably more interesting is that it signals that Cisco clesarly doesn't want any direct involvement in the business to consumer (B2C) market.
Cisco started sending that message when it ditched the Flip camera business back in April 2011. Getting rid of Linksys makes the Cisco strategy clear: we're about business networks and connectivity. We don't want to be sold in retail stores. We're about serious enterprise smarts, not basic gear. You can bring your own device, but we don't want to sell it to you.
Not all of its rivals are following the same path. Huawei, for example, has been aggressively pursuing consumer buyers, particularly with phones. But there is a certain undeniable logic to the move.
The consumer market is cut-throat and ruthless; margins are thin, there's a constant demand for innovation, and customer support can be costly. Even when you're massively successful, the sniping is constant (check the painfully dull coverage of Apple's financial results this week) By comparison, enterprise and business buyers represent a much less snarky market.
There's also lots of money to be made in providing the back-end systems which power all those consumer devices that are elbowing their way into the office. Delivering cloud-based solutions to tablets and phones requires a robust networking infrastructure. Ditto for rolling out video-on-demand solutions.
In that context, Cisco might draw solace from Microsoft's quarterly results announced this week. The standout area? Arguably not gaming or Windows, but the Server & Tools division. There's still money to be made in infrastructure.