Deals

Can Cisco be a consumer tech company?

Things aren’t looking great for Cisco’s consumer tech sector, where product orders dropped 15 percent in the most recent operating quarter compared to the same quarter a year ago.

That’s despite the release of the Cisco Umi, a web-connected camera that sits on top of televisions that’s designed for home video conferencing. It was an attempt to bring the company’s popular enterprise-class telecommunications hardware to everyday consumers, but the price tag was a bit absurd — $600 for the actual device, plus an extra $25 each month to use the service.

Cisco’s price for Umi was telling in and of itself — there’s a pretty big disconnect between Cisco and the consumer marketplace. Cisco doesn’t have that much reach in the consumer space, outside of wireless router sales. The company’s orders from enterprise customers were up 10 percent last quarter when compared to the same quarter a year earlier, and orders from the public sector were up 7 percent.

The company’s overall sales were up 6 percent in the second quarter of its 2011 fiscal year, from $9.8 billion in its 2010 fiscal year to $10.4 billion. But its net income fell by around 18 percent to $1.5 billion (or 37 cents per share) in the second quarter of its 2011 fiscal year, from $1.9 billion in its 2010 fiscal year. That decline was in line with the consensus estimate of 35 cents per share by Wall Street analysts.

The Cisco Umi experiment seems like it didn’t go as well as planned. The rest of Cisco’s product orders grew while consumer orders shrank by 15 percent. Overall, Cisco’s product orders were up 8 percent, according to a presentation given during the company’s conference call. Cisco is also traditionally seen as an enterprise technology bellwether because it has a massive reach in both the commercial and governmental space.

Cisco did warn that governmental sales were slipping, and lowered its profit outlook for the next quarter as a result to between 35 and 38 cents per share. The consensus estimate of Wall Street analysts was an outlook that had Cisco earning around 40 cents per share in the next quarter. Investors didn’t really like the new guidance and sent Cisco’s shares down about 9 percent in extended trading to $20.12.

blog comments powered by Disqus