Scientific Atlanta

Killing Flip was just the beginning

April 19, 2011: 12:12 PM ET

Cisco is reorganizing its consumer business to acknowledge it never really took off. But the company has more divisions to shed before the Street is satisfied.

John T. Chambers, Chairman and Chief Executive...

Cisco CEO John Chambers has tough work ahead. Image via Wikipedia

By Dan Mitchell, contributor

FORTUNE -- There's a certain allure to being a household name, so you almost can't blame Cisco CEO John Chambers for trying to push his company into consumer markets. But that allure is ultimately superficial. Cisco's core products are routers and networking equipment. Those businesses might be dull, but that's where Cisco (CSCO) has thrived. On the consumer front, it has flopped.

Last week, Cisco announced that it would stop making the popular Flip camcorder. The company announced that it would focus more on its core businesses. The challenge there is that the networking-gear business is rapidly changing, with prices (and hence, margins) falling and new competitors entering the market.

Still, Cisco is the leader, owning as it does about two-thirds of the market for networking equipment. And with the economy recovering, big customers are finally making needed purchases they had been putting off for as long as they could. (One exception: cash-strapped governments.) More

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