Cisco to sell off Linksys division

Linksys logoBloomberg is reporting that enterprise networking gear maker Cisco has engaged the services of Barclays to offload its Linksys division. Linksys, which makes home networking gear like SOHO routers and wireless access points, was acquired by Cisco in 2003 for $500 million, and its products have been sold with the branding "Linksys by Cisco" since. Linksys products have retained their focus on home users, while Cisco's main branding has been reserved for its enterprise equipment.

According to the Bloomberg report, the move to sell Linksys comes as part Cisco's broader strategy, which will see it exit the consumer space entirely. The report makes a comparison to Cisco's Flip video camera acquisition in 2009; in spite of promising technology and good sales, the small HD video cameras were discontinued by Cisco in 2011. Speculation at the time was that Cisco had been more interested in acquiring Flip's intellectual property portfolio and integrating it into their own videoconferencing technology rather than actually selling pocket-sized video cameras to consumers.

Cisco to sell off Linksys division

The divesting of Linksys does indeed align with the direction Cisco stated it was headed in 2011, namely the shedding of consumer businesses and focusing on five specific areas: "core routing; switching and services; collaboration; architectures; and video." Cisco has a tremendous presence in data centers and telecom closets, and there's a lot of shareholder value in focusing on higher-margin enterprise hardware rather than notoriously low-margin consumer gear. Bloomberg speculates that the Linkys sale will likely return far less than the $500 million Cisco originally paid nine years ago, precisely because Linksys products carry such a low margin.

Cisco is also still stinging from the PR backlash it triggered six months ago when it attempted to drive all of its Linksys users toward a managed service with Cisco Cloud Connect. That service ostensibly made it easier for users to manage all their Linksys devices from anywhere by grouping them all into a single portal. But the move had the practical effect of forcing users to log into a Cisco website in order to view or change their own device's settings. Cisco eventually relented, but the misstep cost a tremendous amount of goodwill among tech-savvy consumers.

There is no word on potential buyers for Linksys, though it might be a tough sell: whomever picks it up will be taking on what Bloomberg characterizes as "a mature consumer business," meaning that Linksys arrives as-is, without much room for innovation or large revenue spikes.

Source: Ars Technica

Tags: Cisco

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