Cisco Kids No More: Enterprise Networking Regains Company Dominance, at Least for Now

In a move that reinforces its repositioning away from low-margin, low-influence networking and IT markets, CSCO has just announced the pending sale of its Home Networking Business Unit (mostly Linksys) to Belkin, a private company based in Playa Vista, Calif. CSCO will keep a few fingers in the pie, however; the official release states that “Belkin and Cisco intend to develop a strategic relationship on a variety of initiatives including retail distribution, strategic marketing and products for the service provider market.”

The Linksys/Belkin announcement comes within hours of CSCO’s announcement of intent to pay approximately $475 million for Israel-based Intucell Systems, which makes self-optimizing network (SON) software. Currently coded for mobile operators and carriers, Intucell’s software enables advanced, real-time, Big-Data-crunching analysis, configuration and management of network bandwidth and traffic. This is a big deal for CSCO as it seeks to extend its presence and dominance in telecom networking markets. But this type of software also enables similar offerings for hundreds, if not thousands, of Cloud services providers and enterprise networks seeking dynamic, inexpensive, effective, and self-healing network management capabilities.

On one hand, these two announcements are powerful moves for CSCO that allow the company to put much of their ill-fated, low margin, low impact consumer initiatives behind them. CSCO is, at its core, a networking giant, and this reaffirms and bolsters that reality. They are bolstering network management and security with software acquisitions; they are working to simplify licensing structures; and they are implementing a very bold software-defined networking (SDN) strategy.

However – and you knew there would be a “however” – we remain somewhat concerned that CSCO could still wander too far afield from what it does best, and what it influences or controls. For example: In their most recent analyst call, CSCO leaders including John Chambers emphasized that they want the company to become much more of a broad-based IT provider. While everything we see happening right now retains a significant networking center, (e.g., developing a platform-based approach to linking data, business apps, and process management), we remain cognizant of how things like the UCS server business and the WebEx conferencing business are, at least today, adjuncts to a core networking platform strategy and position. We don’t mean to be Flip about it, but while we do understand that any Master Brand with the role, size, and reach of CSCO has to find new areas of business or stall, we still believe that there is a substantial chance that CSCO could re-stray or over-invest beyond its realistic span of influence..

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