Friday, January 20, 2006

Cisco's Consumer Dreams

Continued from page 1

By Eric Hellweg

Still, what makes Cisco think it can succeed in more mainstream areas of consumer electronics? In part, its move has to do with the shifting nature of consumer electronics. The line between standalone items, such as a stereos, and the kinds of networked products that Cisco has excelled at, is blurring. Stand-alone voice-over-Internet phones are becoming more common -- and Cisco already offers such a device for businesses. With digital cable reducing television to nothing more than a data stream, Cisco has a natural affinity with cable-box companies like Scientific Atlanta.

What's more, it's clear from rising phenomena such as home wireless networking, massive sales of songs, movies, and TV shows on Apple's iTunes, and technology that allows viewers to program their TiVos over the Internet that consumers are becoming more accustomed to incorporating the Internet into their home-entertainment habits.

In fact, success for Cisco in networked consumer electronics goods could ultimately mean success for its core product line as well. If more consumers accept the idea that radios, phones, and stereos can access the Internet, and enough compelling applications push consumers to actually use these Internet-friendly components, Cisco will likely sell more of its infrastructure router and switching hardware as overall Internet usage increases.

Its move into consumer electronics carries significant risks as well, though. Consumers are familiar with brands such as Sony and Apple, and not so much with Cisco -- at least not on the shelves of Best Buy. Aware of this, Cisco has followed its tried-and-true strategy of entering new markets via acquisitions and maintaining brand names when it makes sense. Its decisions to buy Linksys and KiSS, and to continue selling products under those names, are prime examples.

But there's a big difference between selling Linksys modems and routers and hawking radios and home-theater equipment.

If Cisco's current push is successful, it will likely mean two changes for consumers: more choices and cheaper prices. When new products appear on shelves, the companies making existing products often drop their prices to maintain market share. So Cisco will have keen competition. Still, by the holiday season of 2006, it might not be uncommon for gadget-heads to wake up with a little Cisco under the tree.