AllThingsD » Eos

Cisco Kills the Flip Video Camera Business

Arik Hesseldahl — Tue, 12 Apr 2011 13:39:30 +0000

Cisco Systems today announced what it called a realignment of its consumer electronics business. The highlight, however, is that the Flip video camera business is being shuttered, and 550 people will lose their jobs. Cisco acquired Pure Digital, the company that makes the Flip line, in 2009 for $590 million.

At the time that Cisco acquired Pure Digital the Flip was flying high as the top-selling camcorder in the U.S., according to the research firm NPD Group, and by mid-2009 had clocked sales of about 2 million units. Stephen Baker, an analyst with NPD says on his blog that unit sales were essentially flat in 2010 and that the average selling price on a Flip camera rose by five dollars to $158. And though its hard to know what the gross margins are, Baker says Cisco’s Flip video unit was “far and away the leading consumer video camera company.” What probably did it in was holiday sales last year: Unit sales dropped by 19 percent versus 2009, though for that Baker blames “strategic marketing missteps,” rather than a drop in any underlying demand.

NPD numbers show the Flip maintaining its market share lead as recently as February of this year, with 21.6 percent of the market ahead of Sony which had 20.9 percent. Both saw their shares fall as Kodak saw sales of its Playsport and Playtouch video cameras pick up steam. Kodak boosted its share to 12.8 percent versus less that 5 percent a year ago.

The problem wasn’t the camcorder business. The problem was the iPhone. Months after Cisco’s purchase, Apple added video recording to the iPhone 3GS which went on to sell a million units during its first weekend on the market and 7.4 million units within a single quarter. Video recording is now so common on smartphones that it’s strange if a phone doesn’t do video, and at a quality that matches if not exceeds what a Flip can do. Given time, smartphones will be substantially better than Flip cameras, though again it’s hard to know what feature improvements were on the Flip camera roadmap.

Other changes announced by the networking giant: a plan to “refocus” its home networking business, the backbone of which was Linksys, the privately held home networking company it acquired in 2003 for $500 million in stock. Cisco says it wants more profits from that unit and wants it to be more closely tied to its core networking and infrastructure business.

Another change: The EOS business–essentially a software platform Cisco launched in 2009 that offered media companies a digital gateway into the home–is being gutted and its core video technology redeployed elsewhere within Cisco. Dan Scheinman, the unit’s general manager, Tweeted this morning that he had resigned from Cisco, saying the business had succeeded technically, but was about two years ahead of the market.

Cisco also said its ?mi consumer video conferencing product line–the one that had been the subject of the latest round of ads starring Ellen Page–will be integrated into its business telepresence products.

The reaction from investors has been tentatively positive. Cisco shares are up three cents to $17.50 this morning, though the price is still pretty close to a 52-week low. Cisco said it will take a $300 million restructuring charge.

Standard and Poor’s analyst Ari Bensinger quickly issued a short note reiterating his “Buy” rating on Cisco. “We see these moves as part of a new strategy to de-emphasize consumer-related products that have been dragging down profitability, and believe more announcements are on the way,” he wrote. “We are positive that CSCO is sharpening its focus on its core competency of routing and switching, which should see good growth opportunities as the industry migrates to the cloud.”

Here’s a two-year-old interview Kara Swisher conducted with former Pure Digital CEO Jonathan Kaplan, shortly after he had sold his company to Cisco. He didn’t stay long. Cisco announced his departure to “seek other opportunities” in February.

[ See post to watch video ]

Has AT&T Bailed on Motorola's Android Phones?

John Paczkowski — Thu, 27 Aug 2009 16:20:07 +0000

When Motorola announces its new Android handsets at a scheduled Sept. 10 event in San Francisco, AT&T isn’t likely to be among their carriers. Sources close to the company tell MKM Partners analyst Tero Kuittinen that AT&T (T) balked at Motorola’s Sawgrass and Heron handsets. Allegedly because of their dated display technology, the company has chosen not to carry them. That’s bad news for Motorola (MOT), which pinned its hopes of a turnaround on Google’s (GOOG) Android OS.

“We expect Motorola’s 2010 performance to hinge largely on the success of Android models debuting in 4Q09. Just months ago, the expected launches were ‘Morrison’ for T?Mobile, ‘Sawgrass’ and ‘Heron’ for AT&T, and ‘Sholes’ and possibly ‘Calgary’ for Verizon” (VZ), Kuittinen said in a note to clients. “We believe the AT&T models have been canceled, and Verizon has pushed ‘Calgary’ into 2010.”

According to Kuttinen, “The loss of AT&T’s support for 4Q09 changes the winter outlook for Motorola dramatically. It is likely that the success of the $99 iPhone, combined with the possible November launch of the $99 Palm Eos could put AT&T in a situation where its $100 smartphone range for the Christmas quarter is already full of models featuring very advanced software and display technology.”

A worrisome turn of events and one that will weigh heavy on Motorola’s financials if it proves true. Said Kuittinen: “The narrowing of Motorola’s Android plans may have a substantial impact on the winter performance of the company’s handset division precisely because Motorola needs a rapid roll?out of a wide range of follow?up models for its ailing RAZR, Q and Z series models.”

Has AT&T Bailed on Motorola's Android Phones?

John Paczkowski — Thu, 27 Aug 2009 16:20:07 +0000

Sept. 9 Apple Event to be Tablet-Free

John Paczkowski — Tue, 18 Aug 2009 18:00:30 +0000

[ See post to watch video ]

Palm Pixie Launch Delayed Until 2010?

John Paczkowski — Mon, 17 Aug 2009 18:16:35 +0000

Palm’s next webOS handset, the so-called Eos (codename: Pixie), is still in the pipeline, but it may not arrive at market for some time. Though some observers have speculated that the device would debut in the late fall in time for the holidays, others are now suggesting that a 2010 launch is more likely.

“We think that the Pixie, which we believe is being geared for AT&T and has a different form factor than the Pre, is not likely to be available for the 2009 holiday season,” Morgan Joseph Analyst Ilya Grozovsky wrote in a research note to clients, adding that Palm (PALM) needs to push the Eos hard if the company hopes to hold its own against Apple’s (AAPL) iPhone–particularly its $99 model–at AT&T (T).

“We do not have significant unit assumptions for this product given the continued success of the iPhone at AT&T,” Grozovsky said. “Nevertheless, we believe that Palm needs all the unit help it can get to achieve profitability and a delay in incremental units at AT&T with the Pixie would be a setback to this goal.”

Palm declined comment on the Morgan Joseph note.

Incidentally, Grozovsky is among those analysts who believe Pre sales are slowing. According to his checks, Pre sales fell from 200,000 units in June to 100,000 in July. He expects them to fall even further in August. And should this occur, a price cut may follow.

Said Grozovsky: “Should sales prove to be in line with our checks, we believe price cuts may be looming going into the holiday season in an effort to spur holiday sales of the Pre. This could, in turn, hurt Palm margins as we believe that Palm will have to make price concessions to Sprint” (S).

Palm Analysts, Best Buy Suffering From Pre-Mature Elaboration

John Paczkowski — Mon, 27 Jul 2009 18:19:08 +0000

Add another voice to the chorus of analysts claiming that sales of the Palm Pre have been on the decline these past few weeks. In a research note published this morning, CL King analyst Lawrence Harris, speaking to the controversy over sell-though numbers for the Pre, cast his lot with those who feel sales are slowing.

“Our channel checks suggest sales of the Pre have indeed slowed. Store traffic at Sprint stores has declined since mid-June,” Harris wrote. “The Pre, which initially was not available for online purchase from Sprint’s website, became available last week. We believe a majority of the Pre sales have been made either to existing Palm users or Sprint subscribers. It also appears not to have been as successful as the iPhone in terms of winning subscribers from other carriers.”

Harris notes that even Sprint (S) CEO Dan Hesse seems uncertain of the device’s true impact in the market. Speaking at Fortune’s Brainstorm: Tech conference in Pasadena, Calif., last week, Hesse said of the Pre: “You won’t know if we have a real hit on our hands until its been out three months, four months, five months….It’s too early to tell….We’re just getting it rolled out in decent quantities for direct distribution.”

An interesting admission. That said, the Pre did set record first-day and weekend sales for Sprint, And according to the channel checks of some other analysts, sales are not slowing. Fact is, we won’t know for sure until Palm (PALM) and Sprint go on record with real sales metrics–as Sprint may do later this week when it reports earnings.

One last point worth noting here: CL King’s note arrives amid widespread reports this morning of a Best Buy promotion that cut the Pre’s price to $99 with a two-year contract. Though the retailer dismissed the cut as an “unintentional pricing error” and promptly withdrew it, a number of Pres appear to have been sold at that price across the country.

Odd that such an accident would occur nationwide complete with in-store pricing sheets, isn’t it? Makes you wonder if someone jumped the gun on a forthcoming promotion and if we’ll see the Pre at $99 before the end of summer. And if we do, at what price will the Eos/Pixie–the Pre’s rumored little brother–be sold? $49.99?

LogMeIn Logs IPO Gains

John Paczkowski — Wed, 01 Jul 2009 20:00:22 +0000

[ See post to watch video ]

Palm Pixie in November?

John Paczkowski — Tue, 30 Jun 2009 22:00:10 +0000

According to some lines of code secreted away within webOS, Palm has at least one more handset in the pipeline–the so-called Eos (codename: Pixie).

The device, intended as a replacement for the Centro, Palm’s last PalmOS smartphone, is expected to feature a 2.6-inch multitouch display, inline keyboard, two-megapixel camera and 4GB of internal storage, among other features. Word on the street has it priced at $99 with contract, rounding out the lower end of Palm’s new webOS lineup.

And when will it arrive at market? No one seems to know, though Tavis McCourt and Justin Patterson at Morgan Keegan & Company speculate that we’ll see it sometime this fall. “We believe initial Pixie shipments will begin in the November quarter, although timing is still uncertain (we believe the goal would likely be a holiday launch),” the analysts wrote in a research note today.

“Although Pixie is unlikely to be a ‘hero’ product with massive advertising and subsidy support, its $99 price point should drive substantial volumes and we believe distribution can be broader initially if not exclusive. In general, we have used the Centro as a benchmark for the Pixie. At a $99 retail price point, the Centro peaked out at about 1 million units shipped/quarter with distribution at all of Palm’s significant historic customers. We have the Pixie ramping quickly to these levels in calendar 2010 as distribution ramps.”

That seems a reasonable expectation, especially if the Pixie isn’t exclusive to a single carrier. And at present, it’s thought that the device will be available, at least initially, from both AT&T (T) and Sprint (S).

So, as McCourt and Patterson note, Palm (PALM) could be poised for some significant gains in market share. “We expect Pre shipments of 2.2 million in 2010 (May 2010) and Pixie shipments of 1.2 million,” the analysts write. “Based on our bottoms up estimate, we forecast Palm will ship just over 7 million smartphones in fiscal 2011, which would likely represent about 4 percent of smartphone share, but a more meaningful–10 percent share of its core N. America market.”

[Image credit: Engadget]