Cisco to stop production of Flip camcorders

Discussion in 'Current Events' started by Shaun.P, Apr 12, 2011.

  1. Shaun.P macrumors 68000

    Shaun.P

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  2. ender land macrumors 6502a

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    #2
    Wow, those are well priced (just saw them for ~$120) and easy to use (just used them for a large team project).

    Also surprises me a fair bit.
     
  3. Shaun.P thread starter macrumors 68000

    Shaun.P

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    #3
    For what reason would they be unable to sell the business?
     
  4. Sodner macrumors 68020

    Sodner

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    #4
    Wow. I guess to many phones have video capability now. I remember when the iPhone 4 was launched and some said that would spell doom for the Flip.

    They were right!
     
  5. steviem macrumors 68020

    steviem

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  6. Liquorpuki macrumors 68020

    Liquorpuki

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    #6
    It's a dumb move because the market for ultracompacts is very much alive. They basically just gave the market away to Kodak.
     
  7. BanjoBanker macrumors 6502

    BanjoBanker

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    #8
    That is a bummer. My wife has one and she loves it. It is always with her when we have the grand kids or she is at our daughter's house. The Flip is the ideal video camera for people who want to shoot the occasional video but don't want the hassle of toting around a video camera. I will miss the flip, I hope someone else comes along with a viable alternative.
     
  8. joshuastar macrumors newbie

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    #9
    actually, it makes sense.

    we had four Flips at our school, and so we got to see what happens when they were used regularly. within a few months, the storage had degraded and the battery life was horrible.

    we contacted flip customer service, and they responded with "that's just what happens after a while..."

    we were supposed to have over an hour's worth of space, but they got to a point where even if you deleted everything off of the camera, you only have 15-20 of time available.

    then, the battery got to the point where it wouldn't hold a charge at all, and wouldn't turn on.


    of course, this was only one model, but if they're all like that, i can totally understand.

    by the way, there is a viable alternative: kodak.

    they make their z series in a very similar fashion to the flip, but i found them to be superior because they run off of rechargeable batteries (which our flips didn't have) and SD cards (which the flips also didn't have).

    try the kodak zxD (weather resistant) or the kodak zi8.
     
  9. Liquorpuki macrumors 68020

    Liquorpuki

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    #10
    Yeah, the flagship comparison for the last couple years has been Flip UltraHD vs Zi8. Personally I thought the Zi8 was the better camcorder, but the Flip still held its own. Now that there are sub $150 camcorders that are waterproof, shockproof, etc with features like face recognition, social network integration, etc, there are a ton of places Cisco could've taken the Flip. I bought a Playsport a month ago because I'm not gonna pull out my iphone 4, which can't even do 60 fps 720p, when I'm at the beach or in the water or running. Cisco could've developed a Flip to compete with the Playsport and it would've easily sold.

    Even if they didn't want to develop the brand, there's no reason why Cisco couldn't have sold it instead of kill it. It's a dumb move that makes no business sense.
     
  10. joepunk macrumors 68030

    joepunk

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  11. steve2112 macrumors 68040

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    #12
    For the same reason the iPad and iPods don't have SD card slots.
     
  12. benzslrpee macrumors 6502

    benzslrpee

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    #13
    why? Cisco is first and foremost a network equipment company. that's what they've been doing and it's what they're good at.

    in the long run, could they have competed with Canon, Nikon, Olympus, Sony, Panasonic, Philips, Sanyo, Kodak and other companies with at least 30+ years of experience in consumer imaging devices?

    could they have priced lower than Coby, Aiptek and other low cost Asian manufacturers?

    could they have staved off the influx of iOS, Android, WP7 and WebOS devices that have progressively moved their mobile devices towards HD recording capability?


     
  13. Liquorpuki macrumors 68020

    Liquorpuki

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    #14
    First and most importantly, if any of those were a concern and they wanted to exit the portable camcorder market, they could've sold the business instead of kill it. I could understand killing a losing venture. The Flip, on the otherhand, was actually successful. Even if Cisco wanted to go back to their roots, killing it makes no sense financially, especially when there are companies in Silicon Valley who would've been in line to buy it.

    The Flip owned 30% of the portable camcorder market in 2010. It was profitable and went head to head with Kodak (17%) as the leaders in that market. The rest of the manufacturers you listed, camcorder experience or not, budget or not, were trying to get in. Except for Nikon and Olympus, which to my knowledge, focus entirely on cameras and don't make pocket camcorders.

    The whole thing about smartphones pushing out portable camcorders is exaggerated too. There's still plenty of shelf life for ultra compacts. I have an iPhone 4 which can't even do 720 @ 60 fps. Meanwhile, the sub $150 camcorders can do 1080p recording, have face recognition, can be mounted on tripods, can be shockproof/waterproof/dustproof, and can do macro or wide angle recording out the box. One day we'll all go to cloud storage but until then, plenty of physical media companies will still be around because there's money to be made. Same thing with pocket camcorders. Cisco should've acknowledged this and if they didn't want to capitalize on it, they should've sold the division instead of eating its value and laying off 550 workers.
     
  14. 7thMac macrumors 6502

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    #15
    A lot of money down the drain. And Cisco can't sell the business to a third party? Nice due diligence by the acquisition team. Also, I assume the production is outsourced. Why did they need 550 employees? That's a huge staff. What were they doing?
     
  15. vincenz macrumors 601

    vincenz

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    #16
    No wonder prices were dropping so much over the past couple months.
     
  16. benzslrpee macrumors 6502

    benzslrpee

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    #17
    the Flip products contributed about 1.3% to their revenue according to their 2010 10K filing. by the time you subtract out cost of goods + SG&A, that 1.3% is barely noticeable in their operating profit. then deduct depreciation/amortization/interest/tax... it's like a drop of rain in the ocean.

    a divesture hinges on these factors:
    - how much they can sell it for
    - how much it would cost to sell it
    - who would buy it

    not sure which tech company would repeat Cisco's mistake in buying a company that's marginally related to their core business. but sure, let's say someone bites. which companies off hand would have $0.7 bn (assuming it can still fetch the same price) in cash to spend in current times? the three that come to mind would be Apple, Google and Microsoft. all of them are completely focused in the mobile industry right now. however let's say one of them does want to buy, what costs do Cisco incur? they'd have to hire an investment bank to sell Flip and a law firm to advise on legal issues... neither of which come cheap.

    video recording is not my forte so i'll go with the suggested opinion that there is a small portable camcorder market out there. Kodak, as mentioned, seems to be a powerhouse in this segment. their stock is at $3.32, a negative EPS, negative operating income for the past 3 years, negative net income for the past 3 years and negative free cash flow for the past 3 years. Kodak can not turn a positive EBIT, nevermind NI or FCF, with a 17% market share in this segment. going by the logic that market share = profitability, then it seems awfully strange that the #2 player is now ending up to be a likely buyout candidate.

    back to the original question at hand of selling Flip.

    the logical buyers would be in the consumer imaging industry due to likelihood of product diversification, economies of scale/scope and new target demographic. however, the opportunity cost for these companies to create a competing product (Sony Webbie) is next to nil... they already have optics, they already have sensors, they already have existing supply chains/product channels etc etc etc. it's cheaper for them to make their own "Flip" than to buy it. i really think the Asian firms would be a good buying candidate except they'd probably have to take on a significant amount of debt to complete a $0.7 bn transaction. everything i know about Asian business culture is that they are pretty conservative when funding projects with debt capital.

    this is just my own analysis based on Cisco's and Kodak's annual reports. though honestly, i'm pretty sure Cisco tried to shop Flip around before closing it down... i would if i were CEO :D never know if you'd get lucky and find a buyer willing to pay through their nose!


     
  17. Hans Brix macrumors 6502

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    #18
    Was only a matter of time before these devices were redundant.
     
  18. robanga macrumors 68000

    robanga

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    #19
    What an amazingly bad acquisition. $600M for something you essentially close a few years later? Can i sell something to Cisco? I am sure i can find something in the garage worth $3-10M.

    The thing is it did not have to be, if this was acquired by a more consumer orientated company you could really build out the social aspects of the software, build out lots of different accessory options etc. Create apps that live on iOS, Android, Windows etc

    If not one the big profitable companies, it could be a good play for someone else. The problem is there are not a lot of mid range consumer brands in risk taking mode right now.
     
  19. R94N macrumors 68020

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    #20
    I really wanted one of these a while back. Their advertising and marketing was brilliant. I feel sorry for the 550 employees that are going :(
     
  20. robanga macrumors 68000

    robanga

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    #21
    You'll be able to find lots of good deals on them know as the retail channels dump their inventory, and its a good little camera that works with iMovie etc.

    I bought a Mino HD at the height of its popularity just before the acquisition. My kids love playing with that camera still.

    Agreed - its always a bummer for those displaced by change.
     
  21. MacNut macrumors Core

    MacNut

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  22. DaveN macrumors 6502a

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    #23
    My guess

    My guess is because there isn't a big future in them. iPad, cell phone, and digital cameras are now doing much the same thing. For the most part, unless you are serious about video, even the 'full size' video camera market is diminishing.
     
  23. maflynn Moderator

    maflynn

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    #24
    It was a stupid decision for a networking company to buy a company that sells consumer video cameras. I don't see the tie in at all. Plus the fact that the Flip camcorder was all but a fad in the sense that most smartphones like the iPhone have this capability. Why carry a phone and the Flip when the phone will suffice.
     
  24. robanga macrumors 68000

    robanga

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    #25
    I think the challenge for stand alone camera companies, is to deliver as many options as they can for a $500 price point or less in the smallest package as possible.

    Not counting the video done on DSLR's, plenty of people take along real video cameras to family events, vacations etc.

    There are a lot of things you can do to add value;

    1. Better HD
    2. Streaming over the net
    3. 3D shooting
    4. Turn them into HD webcams

    Cisco did not seem to want to mess with the cost of being a real camera company.
     

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