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1/7/2010
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Alexander Wolfe
Alexander Wolfe
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CES Den: Cisco Video Thrust Telegraphs Bandwidth-Bandit Strategy

Cisco CEO John Chambers' plan to support live consumer videoconferencing is a smart stealth move to drive bandwidth demands, and capture the resulting uptick in networking sales. Here's a strategic assessment.

Of course, one can subsequently envision wireless coming to Flip, and then each of those users will go out and buy a wireless router to add to their networks. (Though it beats the heck out of me how homes with more than three machines are going to be able to configure that wireless add-on to be an access point. Do they know not to use the WAN port and to disable DHCP? I guess that's what the designated IT-support relative -- me, in my house -- is for.)

Anyway, you get the picture: Buying Flip was a way for Cisco to both add to its presence in the consumer space and to drive some core home-networking equipment business down the line. Emphasizing the angle was the statement Cisco put out when the acquisition closed last May. Noting that the Pure Digital operation was being folded into Cisco's consumer business group, Cisco said that "the acquisition will take Cisco's consumer business to the next level as the company develops new video capabilities and drives the next generation of entertainment and communication experiences."

Coincidentally, there's been an ancillary branding benefit for Cisco, analogous to what Intel achieved when it took its "Intel Inside" trademark to consumers in the 1990s. Perhaps you've seen Cisco's 15-second Flip ads, which run in heavy rotation on cable. They're to the point, smartly done, and integrate the Flip's distinctive turn-on tone to buttress the Cisco logo with an aural branding stamp, again taking a page from Intel's (in)famous five-tone melody.

Third Video Angle

A third leg of the video-strategy stool can be seen in Cisco's little-reported acquisition of Hong Kong video set-top-box maker DVN. This occurred last November.

Here's how I reported it in a blog I wrote for Network Computing:

As Hilton Romanski, Cisco's vice president for corporate development, described it in a video posted on Cisco's Platform Blog: "When you look at the Chinese market, it's the largest cable market there is. There are 160 million subscribers in the country. A third of those subscribers are on digital networks today."

Here again there is bandwidth method behind what some financial analyst see only as acquisition madness. [This refers to Cisco's decades-long tendency to buy other companies.--Editor]

One final thought: An apparently unintended (though maybe it's not) side effect of Cisco's bandwidth-boosting buys is a blurring of the lines between traditional enterprise networks and where consumers reside. In a macro sense, this is already happening, in the sense that corporate workers no longer much nor care where they live, connection-wise. They're just interested in the resources they have access to.

Still, I think this blurring of the line between corporate and consumer networks will be something that all networking vendors will have to navigate in the coming few years. In this regard, Cisco is seemingly pacing the pack.

What's your take? Let me know, by leaving a comment below or e-mailing me directly at alex@alexwolfe.net.

Follow me on Twitter: (@awolfe58)

Alex Wolfe is editor-in-chief of InformationWeek.com.

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