Bloomberg reports that Cisco has hired on Barclays Plc to find a buyer for Linksys, the popular maker of wireless routers for home networking. Cisco purchased the company back in 2003 for $500 million in stock, and then added its name to Linksys branding in 2008. Now the company wants to shed this division as part of its overall plan to exit the consumer sector.
Unnamed sources told Bloomberg that Cisco is looking to expand its corporate software and technology services. Its trek into the consumer technology frontier has backfired, sources said, caused by a slowdown in sales growth which forced Chief Executive John Chambers to eliminate 7,800 jobs over the past year, and close consumer-based businesses such as the Flip video camera unit.
In Cisco's most recent quarterly report, the company said revenues of its "other" business unit – where Linksys resides – were $220 million, down 11-percent over the year-ago quarter. Sales were also down in the three previous quarters, dropping $42 million in Q4'FY12, $42 million in Q3/FY12, and $130 Million in Q2'FY12.
Karen Tillman, a spokeswoman for San Jose, California-based Cisco, declined to comment. But sources close to the situation claim that the Linksys unit may attract the interest of TV manufacturers looking for a recognized brand and technology. Unfortunately, Linksys will likely not fetch the same $500 million Cisco original paid because it's a "mature consumer business with low margins".
One company that may be eying Linksys is home networking competitor Belkin International. A blog over the weekend posted the unconfirmed rumor, and then a follow-up message from Leah Polk, Senior Global Public Relations Manager of Belkin International, saying that it was merely a rumor and currently there's no official statement to make.
Last month, Cisco said it planned to acquire privately held Meraki Inc., a San Francisco, Calif.-based start-up that "offers midmarket customers easy-to-deploy on-premise networking solutions that can be centrally managed from the cloud."
"As the IT industry transforms in the mobile-cloud era, Cisco is solving customers’ networking and business enablement challenges by delivering cloud networking and device and security services," Cisco said. "The acquisition of Meraki complements and expands Cisco’s strategy to offer more software-centric solutions to simplify network management, help customers empower mobile workforces, and generate new revenue opportunities for partners."
In addition to Cisco, Barclays is also reportedly advising Google on the sale of its Motorola Home Business which sells set-top boxes and equipment to cable TV providers. Google is wanting Motorola to focus on high-end smartphones so that it can better compete with Apple.
