CES keynote: What's Cisco doing in consumer electronics, anyway?

"Who would have thought three years ago that we'd be one of the top players in consumer electronics?" asked John Chambers, CEO of Cisco, a company barely heard of until lately outside of enterprise computing circles.

In a keynote speech this afternoon at CES, Chambers outlined how Cisco now plans to provide "connected homes" with network management and security, along with multimedia storage and distribution.

Cisco, long-time market leader in the network routers used by corporations and telecom companies, decided a few years back to try to leverage its strengths to expand into the consumer space, Chambers said.

The strategy called for acquisitions of companies such as Linksys, Pure Networks, Tribes.net, and Utah Street Networks. "I can't tell you it won't cost you (to expand into a new area)," he told the crowd at CES. "But I think it's a good bet."

Now, Cisco produces the EOS platform along with the Linksys Media Hub, a product announced at CES for storing and organizing multimedia content. EOS will move beyond distributing media content to delivering vendors' media recommendations and even monitoring customers' home networks, he indicated.

Suddenly Cisco

Sharon Fisher

When people think about leading consumer electronics companies, they don't typically think of Cisco as being one of them. Yet the company has been steadily taking steps toward being in that market for more than five years, beginning with its acquisition of Linksys in 2003, bringing it into the home and small-office market with the wireless router vendor. Other acquisitions followed in 2005: KISS Technology, a Danish vendor of networked entertainment devices, and Scientific-Atlanta, one of the two leading cable set-top box manufacturers. Then in 2006, Cisco started making its consumer intentions more explicit. It said then it had plans to start selling a line of consumer products including phones, radios and home theater devices by adding Internet connectivity to these devices, thus creating a new market. In addition to its networking expertise, the company pointed to its ties with Google and Yahoo will also give it an advantage over competitors. Later that year, the company started a $100 million brand marketing campaign intended to make it more familiar to consumers, ranging from a new logo -- one that was easier to display on communications devices, a new slogan, and product placement in popular entertainment such as the television program 24. It also included a media campaign, including newspaper, television, Web and mobile phone ads, after discovering it had a lower brand awareness than many other technology companies, even though it made more money. The company has made some missteps in the consumer electronics space, to be sure, most notably with the iPhone. Not Apple's...its own. Linksys had developed a phone using voice over IP, with what may kindly have been described as lackluster sales, and then sued Apple when it released the iPhone two years ago. After a month, the companies reached an agreement and Cisco licensed the name to Apple. Since then, the company has released a total of three iPhone models, to universal indifference. Now Cisco is pitching the networked home. But companies that arguably have a much better finger on the pulse of the consumer -- such as Microsoft and Apple -- have tried for the much-ballyhooed "networked home" concept, and have fallen flat on their faces. It remains to be seen whether Cisco can do any better.

Cisco acquired conferencing company WebEx in March 2007. Now, in another element of the company's changing strategy, executives are turning to Web conferencing in place of some of their business travel.

"In a six-month time period, I've had double the amount of customer contact with half the time on the road," according to Chambers. The CEO quipped that he can visit companies in five or six countries in a few hours. "And all before lunch," he said. "And you can, too."

In the future, video conferencing will become increasingly important, especially for communications with companies in emerging nations, Chambers said.

Productivity in third-world nations has dropped recently, according to the Cisco chief. But the best way to assist business partners in emerging nations isn't to pay for new physical infrastructures such as roads and buildings.

In a Web 2.0 world, it's more effective to help spur technology leadership in other countries, and to use the Web for ongoing collaboration between continents, he contended.