Even The VAR Guy Flipped for Cisco's Failed Consumer Strategy

Sometimes, The VAR Guy’s views are just plain wrong. As Cisco Systems looks ahead to layoffs in August 2011, it’s time for The VAR Guy to look back at what went wrong at the networking giant. A case in point: The VAR Guy applauded — loudly — when Cisco acquired the Flip video camera in March 2009. And The VAR Guy cheered again in mid-2009, when Cisco prepared to hand out Flip cameras to all Cisco Partner Summit attendees. The strategy sounded so simple: Flip users would load the Internet up with more video, forcing enterprise customers to upgrade their bandwidth and network infrastructure. But in the end, The VAR Guy — heck, and John Chambers — overlooked some key challenges.

Among the missteps:

1. Lack of Innovation: Cisco couldn’t imitate Apple’s consumer device success, where a major product upgrade — iPhone 2, iPhone 3, iPhone 4… seemingly arrived every year. Once you had a Flip there was no urgent reason to buy a new Flip… though The VAR Guy always stocked up to meet his own video needs.

2. Lack of Flexibility: Flip did one thing incredibly well. Video. Meanwhile, smartphones took on more and more video capabilities. For most users, smartphone video was “good enough” — though The VAR Guy will never let go of his Flip. Not even now.

3. Lack of Synergy: Quick — what do the Flip, a Linksys router and a Cisco enterprise switch have in common? Other than sharing the Cisco logo, the networking giant was never able to answer that question.

4. Lack of Focus: At one point, pundits say, Cisco had roughly 60 executive committees in place. The committees would hand out advice to Cisco employees… but the committees couldn’t authorize budget or headcount to assist with that advice. Said one former Cisco employee: “My days were filled with meetings to debate ideas. Now, my days are filled with ideas that get executed.”

Nobody celebrates when a big tech company announces plans to cut 6,500 jobs. Real people are losing real jobs. It’s safe to expect John Chambers to update the situation during Cisco’s Q4 earnings call on Aug. 10.

Big Bets Coming?

And for all those who are pressing the panic button: Keep the situation in perspective. Cisco generated $10.9 billion in net sales and $1.8 billion in net income in Q3. Not great, historically speaking. But plenty of executives would welcome Cisco’s challenges.

Oh, and one final thought: At the end of Q3, Cisco was sitting on $43.4 billion in cash and cash equivalents. That’s billion — with a B. With all that cash, The VAR Guy could buy plenty of Flips on closeout. But our resident blogger wonders: Will Chambers take Cisco on a new, enterprise-related buying spree once the company regains its focus? Surely, Cisco isn’t going to sit on all that cash forever…