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1/7/2010
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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.

You gotta be impressed by Cisco's persistence. For most businesses, that line about using an economic downturn to positioning oneself for the rebound is just a meaningless mantra repeated from a motivational playbook. However, for Cisco CEO John Chambers, the recession has indeed been an opportunity -- a consumer opportunity -- that's come knocking on the networking powerhouse's door, and he's answered the call.

Consider that, on the business-technology front, Cisco used 2009 to extend its reach beyond its networking base and edge into the server market. Its unified computing move has been aimed squarely at the strongholds of HP and IBM.

Now, at the Consumer Electronics Show in Las Vega, Cisco is going wide with the consumer part of its strategy. That plan, seemingly centered on videoconferencing (aka telepresence) and live video, is actually a smart and stealthy way of driving bandwidth usage. The upshot is that Cisco will sell not just video tech , but also seed the necessity for more more networking equipment. In Cisco's universe, it seems, new business opportunities always deliver some solid payback for its core business.

Cisco telegraphed its consumer-video moves Wednesday morning with a press release trumpeting its plans to "showcase(s) breakthrough consumer video experiences at CES 2010."

That release makes more explicit the continuum between sales of the Flip Video camera, which Cisco acquired in 2009, and sales of home networking equipment from its Linksys division. Here's the money quotes: "Cisco, which has shipped more than 200 million consumer devices to date, continues to generate momentum with its Linksys by Cisco home networking products and Flip Video camcorders."

But the most notable thrust is Cisco's plan to leverage its business telepresence leadership into the consumer space. As the release puts it:

At CES, Cisco will also share its vision and progress toward developing an entirely new category of video communication, called home telepresence, which uses a consumer's existing HDTV and broadband connection to deliver a unique natural video communication experience from the comfort of a living room. Cisco will enter U.S. home telepresence field trials this spring, with Verizon as an early partner. Home telepresence field trials in France will start later in 2010, with France Telecom as Cisco's early partner.

Cisco CEO Chambers emphasized that angle and indeed intends to take telepresence to a new level of consumer sexiness, talking about enabling live video over not just computers but also smartphones and TVs. "It will be about any device using video," he told reporters. (Full disclosure: I wasn't there. The quote is from The Wall Street Journal.

Big Consumer Back Story

Placed in context, Cisco's consumer play at CES isn't a bold new breakout, but rather a smart, incremental extension of a strategy that's been careful worked for some time.

Consider Cisco's 2009 purchase of Flip Video camera maker Pure Digital for $590 million. If you don't have a family member or friend who's evangelized the wonders of the under-$200 Flip, you're probably still reading books on paper. Pure Digital created the category of the one-button camera, incredibly not sacrificing image quality while taking ease-of-use to heretofore unachieved heights.

But heavy consumer demand for the Flip cameras was just the first-order effect. As Cisco must have smartly surmised in evaluating Pure Digital's acquisition potential, a second-order dynamic is driven by thousands of consumers uploading family-picnic snippets and stupid-pet-trick videos to Facebook and YouTube. This translates into increased bandwidth demands, or more precisely--since the aggregate added bandwidth isn't all that daunting; we're not talking Avatar here--new home users, each requiring a Linksys router.

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