Sunday, September 5, 2010

“Cisco Will Save the World”

“Cisco Will Save the World”

Cisco Will Save the World

Posted: 05 Sep 2010 08:55 AM PDT

So there I was the other day, paying a guy to hook up my new surround-sound system, Blu-ray player, and flat-screen television, and it occurs to me: I'm paying a guy to hook up my TV.

Years ago, in the midst of a misspent youth, I used to make fun of the apocryphal "man who couldn't figure out his VCR." You know who I'm talking about -- the guy whose VCR player worked OK, but the display had been flashing "12:00" since 1986.

Well now … I am that guy. How did it come to this?

Tech evolves, I don't
In my own defense, I think it has something to do with the evolving complexity of technology. Used to be, you bought a TV, you plugged it in, and it worked. Then, cable arrived. OK … so buy it, plug it in, and now screw in the little cable plug. Now it works. VCRs added a few more plugs, a little light data entry, but basically nothing more complicated than microwaving a frozen dinner.

But then came the Acronym Apocalypse: Not just TVs and VCRs, but DVD players. DVRs. LCDs. Dolby-vs.-DTS. Lately, it seems you cannot open the paper without reading of a new tech gadget promising to add complexity to the tangled mass of wires and screens that's become your life. TiVo's (Nasdaq: TIVO) got one box to stream entertainment, while Netflix (Nasdaq: NFLX) and Amazon.com (Nasdaq: AMZN) share another. (In fact, Netflix now seems to be in everything.) Apple TV is back with a vengeance. And I hear even Google (Nasdaq: GOOG) may be going -- what's the word for the opposite of virtual? "Actual," I guess -- with a set-top box to support its Google TV initiative.

These devices all offer similar services, but there are key differences that normally result in consumers having to layer several devices into their home entertainment systems.

And don't even get me started on the PlayStation-Xbox-Wii mess. Is there any solution to this insanity?

Actually, yes. And its name is Cisco Systems (Nasdaq: CSCO). With every other tech company on the planet seemingly intent on making our lives more complicated with new gadgets, Cisco seems to be taking another road -- one aimed at simplifying the gadgets we already own.

Cisco makes it simple
By 2006, most of America had given up the struggle for free TV, and acquiesced to the installation of cable boxes atop their TVs. Cisco saw DVRs as a way to make TV viewing even more convenient, and bought Scientific-Atlanta -- catapulting itself into the top ranks of DVR makers, right there with Motorola (NYSE: MOT), in an instant.

Not long after, Cisco saw in Apple's iPod the imminent demise of the compact disc, and quickly set about converting our stereo systems and television sets into combined entertainment centers. In an effort to keep the cables to a minimum, it did so by inventing a new wireless home audience system.

Not long after, the company saw the potential to simplify video capture in a little gadget called the "Flip" -- and bought Pure Digital Technologies, lock, stock, and barrel. While not a "pure" convergence play, the acquisition fell right in line with Cisco's promotion of the simple.

The more Cisco changes, the more it stays the same
And the march to simplicity continues. Awhile back, I received an email from Staples advertising a product that would allow me to: "Set up my home wireless in 15 minutes. Guaranteed. Or Staples will send you a $25 Staples Gift Card." (The prize has since slipped to $20, but it's still there for the taking.)

Would you like to guess which company emboldened Staples to make this claim -- and guarantee? It was Cisco and its new "Valet" home router, manufactured by the Linksys division. According to the companies, Valet will cut even more wires than the stereo system did last year, using wireless Internet to connect printers, video players, gaming consoles, and mobile devices (think iPod) -- and do so simply, in under 15 minutes.

What's next for Cisco?
At this point I want to issue a public mea culpa to Cisco. When the company first began this push into low-margin consumer electronics, I admit I questioned the wisdom of the move. (I believe the precise word I used was "bonkers.")

But I was wrong. Low-margin consumer electronics may be, but it didn't prevent Cisco from generating $9.2 billion in free cash flow in the last year. And it now seems Cisco has no intention of making itself into "just another consumer electronics company." The march to simplicity, supported by a guarantee of performance, makes for a significant business advantage at Cisco. I look forward to seeing more of the same, and perhaps, one day, a ditching of the company's ephemeral "the human network" tagline for something a bit easier to grasp:

Cisco. Simple. Guaranteed.

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