Cisco shuts down Flip video business, dismisses 550 employees

Cisco (Nasdaq: CSCO) has finally unveiled the first element fruits of its reorganization plan with the first victim being its Flip video division and about 550 employees.

Instead of opting completely out of the consumer business, Cisco plans to realign the remaining consumer business to support four of what it says are five key company initiatives: core routing, switching and services, collaboration, architectures, and video.

These changes, however, shouldn't come as a surprise. Last week, Cisco CEO John Chambers said that he needed to make "targeted moves" to "address what we need to fix in our portfolio."

While the move to shut down Flip is one step in that direction, some analysts believe it is not sufficient to offset ongoing declines in its consumer business.

Alex Henderson, with Miller Tabak & Co. believes that what Cisco really needs to do is exit the consumer business altogether.

"You're in a business that has extremely low margins and you don't have a competitive edge," Henderson told Bloomberg. "They've got a lot of work to do, and this is just a drop in the bucket."

For more:
- see the release
- Bloomberg has this article

Related articles:
Cisco's Chambers plans to overhaul company focus
Cisco needs to put focus back on its routing business, say analysts
Dell'Oro: Service provider router market up 21% in 2010
Infonetics: Alcatel-Lucent takes No. 2 spot in worldwide edge router market

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