Are smartphones on Cisco's wish list‾

Olga Kharif
08 Apr 2009
00:00

Cisco Systems‾ Make smartphones‾ The idea isn't as far-fetched as it may sound, says RBC Capital Markets analyst Mark Sue. 'Considering its big push into the consumer market, we believe Cisco may be developing a smartphone of its own, slated for mid-2010,' Sue wrote in a recent research note.

Sue's note isn't the only source of speculation that Cisco (CSCO), a maker of Internet routers and switches, might be mulling a foray into wireless phones. A series of recent patent filings and the company's own recent expansion into consumer electronics suggest Sue's speculation may not be off the mark.

On Mar. 31, Cisco was awarded a patent for managing time delays in relaying video wirelessly to consumer electronics devices. The same day, it received a patent for a network-connected phone able to stream video. Many of Cisco's recently filed patents mention a personal digital assistant as a device that could potentially use the innovations described.

A history of expansion

Cisco won't comment on the smartphone talk. 'There are a lot of things people thought we wouldn't do that we can do,' says Ken Wirt, vice-president for consumer marketing at Cisco. 'We've done some things that have been surprising to people.' Former high-level Cisco executives say a move into smartphones would fit well with Cisco's strategy.

Under Chief Executive John Chambers, Cisco has a history of expanding beyond its core market of networking equipment for companies and communications providers. In 2003, Cisco acquired Linksys, which sells Wi-Fi access points that provide wireless broadband coverage in homes, cafés, and airports. Later, Cisco bought set-top box maker Scientific Atlanta. This January, Cisco unveiled its own wireless-enabled home stereo system, and in March, Cisco acquired Pure Digital, the manufacturer of Flip camcorders. Even before that acquisition, as of last fall, Cisco had sold a total of 168 million consumer gadgets, more than the total number of iPod music players sold. 'What we are looking at doing is becoming a next-generation (consumer experience) company,' Wirt says.

Cisco has a lot to bring to the smartphone table. One of the company's chief aims is to help consumer devices connect to networks and eat up such bandwidth-hungry services as online video. That, in turn, drives sales of its bread-and-butter networking gear. Current smartphones are limited in their ability to provide a range of multimedia interaction, such as two-way wireless video interaction, Wirt explains. 'The camera is not in the right place' and the device has to be held in a way that makes conversations uncomfortable, says Wirt, who used to head global marketing efforts for handset maker Palm (PALM), where he helped develop Palm's first consumer PDA. Cisco's know-how could be brought to bear to improve two-way wireless video communication and other features.

Leader in 'Telepresence'

Other Cisco executives with smartphone experience include former Motorola (MOT) Chief Technology Officer Padmasree Warrior, hired as Cisco's CTO in 2007. Cisco's manufacturing chief Angel Mendez is a former Palm exec. In addition to its deep knowledge of gear for wireless networks like Wi-Fi and WiMAX, Cisco became a leader in so-called telepresence, which allows for virtual video, audio, and Web meetings, through its 2007 acquisition of WebEx. Earlier this year, Cisco released its iPhone WebEx app, which not only allows several people to get together for audio calls but also to view presentations, a sign Cisco is developing mobile-phone software expertise.

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