Cisco to shut Umi video unit as streamlining continues

Cisco has announced it is to discontinue the production and sale of its Umi video-conferencing tool in another move aimed at reducing the firm's presence in consumer markets.

Cisco launched the tool in October 2010 for $599 upfront and $30 a month subscription, offering users the chance to make high definition 1080p video calls between televisions, however it failed to achieve much success.

According to US site CRN, the firm confirmed in a statement that it is now ending production of the equipment, although customers already using the service will not be affected.

"While we are ending the sale of Umi, the Umi service remains unchanged. Existing customers will continue to be able to use the service to make calls to other Umi subscribers or to Google video chat accounts," a spokesperson reportedly said.

V3 contacted Cisco for clarification but had received no reply at the time of publication.

The closure follows on from Cisco's decision in April 2011 to close its Flip video unit to appease shareholders by refocusing its efforts on its core area of networking products.

Gartner vice president and lead analyst for Cisco, Andrew Butler, told V3 the move was "no great surprise" as the firm was looking to move away from such areas in order to appeal to investors.

"Cisco wants to focus on non-standalone products to show Wall Street that its investments in one area will have benefits elsewhere, something it could not do with the Umi division," he said.

"The closure is not a reflection that the Umi product was bad, but that it was outside the focus and scope of Cisco's core areas and so it makes sense for them to do this."

Butler added that the closure of another consumer-oriented division did not necessarily mean others would follow suit, like its Linksys home wireless business, as they generate better revenue.

"Cisco has always had the perception of being a high-grossing company, with margins on some of its products as high as 60 or 70 per cent, but in consumer markets this is much harder to achieve so it does not appeal to investors," he explained.

"The other divisions it owns in the consumer space are bigger cash cows for the firm and require relatively little investment so it is unlikely they will be closed, although it is not impossible."

Cisco has suffered a tough two years as spending in the public sector slowed, forcing the firm to look to reduce costs by $1bn, chiefly by sacking almost 10,000 workers, to cover the shortfall in its incomes.