Cisco's Consumer Dreams

Is the maker of corporate networking equipment looking to invade the shelves of Best Buy?

Walk down a consumer electronics aisle in any major retail outlet today and you'll see some familiar brands: Sony, Sharp, Sanyo. In a few months, though, you'll likely see a new entrant: Cisco.

According to a report in the Financial Times this week, the San Jose, CA-based networking equipment maker plans to launch a series of products with a distinct consumer feel: mainstream phones, radios, and home theater equipment. While specific details on the products are not yet available, it's likely that Cisco Systems will build networking capabilities into each device; for example, a Cisco radio might play streaming Internet music as well as terrestrial-based signals.

Cisco's chief development officer, Charles Giancarlo, told the Times: "Consumer electronics companies have been able to compete on a stand-alone device, but the dynamics of the market are changing. The Internet and new networking requirements are enough of a disruptor for us to enter a new market."

Elizabeth McNichols, a Cisco spokeswoman contacted for this story, wouldn't comment on unannounced products, but said, "It makes sense for Cisco to be involved in convergence. It's a market we have looked at for awhile, and we've always signaled our intention to expand our offering."

For a brief period in early 2000, Cisco, which makes network infrastructure hardware, such as switchers and routers, had the highest market capitalization of any company in the world. But now, as the market for infrastructure hardware matures, it languishes. Cisco's stock price has been on a slow, mostly steady decline for the last four years and currently hovers around $19, down from an all-time high near $100 in 2000. So a wide-scale consumer product launch, such as the one the Financial Times hinted at, would be a bold but potentially critical move for the company.

Cisco has dabbled in the consumer market in the past. In March 2003, it bought home-networking powerhouse Linksys, and in November 2005 the company announced its intention to buy Scientific Atlanta -- a leading manufacturer of cable set-top boxes. That acquisition is expected to close in April 2006, barring any regulatory hurdles or surprise bids from other companies. Cisco also currently sells DVD and DVR players in Europe through its purchase of KiSS, a European electronics firm.