Cisco could sell off its Linksys division, according to unnamed sources speaking to Bloomberg Dec. 16.
Those sources apparently told the news service that Linksys “is likely to fetch much less than the $500 million Cisco paid for it in 2003 because it is a mature consumer business with low margins.” Linksys builds Wi-Fi routers and various accessories, including network cameras and switches; its target market is home networks and small businesses.
Should such a selloff come to pass, it wouldn’t be the first time in recent memory that Cisco’s decided to rid itself of a consumer line: back in 2011, the company announced it would shut down its Flip video-recorder business. “As we move forward, our consumer efforts will focus on how we help our enterprise and service provider customers optimize and expand their offerings for consumers,” Cisco CEO John Chambers wrote in a memo at the time.
Cisco’s pullback from consumer-facing products is a sea change of sorts from several years ago, when the company made aggressive plays for that segment. At the time, buying up smaller firms such as Pure Digital (which built the Flip) and Scientific-Atlanta (maker of set-top boxes) certainly made sense, at least from a diversification standpoint.
In theory, those acquisitions should have opened up new markets and revenue streams for Cisco products. Instead, by the second fiscal quarter of 2011, Cisco saw its consumer-related revenues falling by significant percentages, even as its core businesses faced increasing competition from Hewlett-Packard and other firms. Pressured from all sides, Cisco made the decision to revamp its consumer unit and rid itself of several related product lines—including, if Bloomberg is accurate, Linksys.
Even as it pulls back from certain areas, however, Cisco is aggressively expanding in other directions. Back in November, the company announced its intention to acquire cloud-networking firm Meraki, which builds products such as Ethernet switches for SMBs (small- to midsize businesses). That deal is expected to cost Cisco roughly $1.2 billion in cash and “retention-based incentives.”