Cisco Seeks a New Angle for Umi
Cisco's Umi home videoconferencing system, the most extravagant and futuristic part of the company's consumer product line, seems to be in search of an identity amid the consumer reorganization that the company announced on Tuesday.
Cisco plans to integrate Umi with its Business TelePresence line and sell it through enterprise and service provider channels, according to a brief statement that outlined the company's shake-up of its consumer businesses. As part of the same reorganization, Cisco plans to discontinue the Flip video camera, "refocus the Home Networking business for profitability" and look at other possibilities for its Eos media business. The moves come after weak financial results that led Chairman and CEO John Chambers to call for a refocusing of the company.
While the company remains committed to video and collaboration as top priorities, it is shifting emphasis away from its consumer businesses, which have not performed well recently. The reorganization may turn Umi into something quite different from its original concept.
Umi was designed to bring Cisco's TelePresence technology into homes for video get-togethers among family and friends. It uses a console and a set-top camera and microphone along with the customer's own HDTV. But the system seems to have debuted, in October 2010, at too high a price. The equipment cost US$599 and required a service for $24.99 per month. Last month, Cisco cut the price of that gear to $499 and introduced a slightly lower-quality version for $399, while cutting the service cost to $99 per year or $9.95 per month. The cheaper box also required less bandwidth.
Analysts said cost, especially the service charge, has dogged the product.
"There just weren't enough features there to get people to pay," said Yankee Group analyst Zeus Kerravala.
Now Cisco says it is re-examining retail distribution of Umi, which has used one main store partner, the Magnolia high-end electronics departments in Best Buy stores. Cisco spokeswoman Karen Tillman did not say the product is definitely leaving Magnolia, but said the retail strategy is under review. The other go-to-market plans Cisco is looking at -- carriers and enterprise -- raise questions about the future shape of Umi.
Bundling Umi with broadband Internet access and other services may be the best way to sell the systems to consumers, Parks Associates analyst Kurt Scherf said. A carrier or cable operator that was already selling several services to a household might be able to throw Umi in for a fairly small incremental cost, Scherf said. Consumers might be more interested in that type of offering, he said.
"Throwing a large upfront price point at them, plus a large monthly subscription, was just not the way that you were going to encourage uptake of this," he said.
Cisco would prefer to go through service providers anyway, Scherf said. "They want to feed the service providers the solutions and allow the companies that have the most direct contact with the customers [to] be able to successfully sell those," he said.
At the launch of Umi, Cisco said it was already conducting a trial with Verizon Communications on its FiOS fiber-to-the-home network and that the carrier was expected to launch a Umi service early this year. On Tuesday, Verizon spokesman Alberto Canal said the trial was over and had gone well, but he would not comment on availability of a commercial service.
Selling Umi as a product for enterprises offers two possible future directions for the system. It could be a high-quality platform for telecommuters to stay connected with the business, Yankee's Kerravala said.
For videoconferencing from home, Cisco recommends a PC-based desktop system from its Tandberg acquisition that is designed specifically for business use. That product costs about $300 and carries no special service fee. But Umi provides better quality, includes features such as recorded video messages for contacts, and can work on a TV in a home office, separately from the PC, Kerravala said.
"I think the Umi product is one of the best quality video systems I've ever seen," Kerravala said. The Tandberg-based platform, on the other hand, is designed for use on slower Internet connections, so there could be room for both, he said.
Because Umi is not very widely used, customers have had a fairly closed community of potential contacts to talk with, Kerravala said. This has been a weakness in the consumer arena, where Skype offers millions of other users, but it wouldn't be an issue for business meetings, he said. In addition, a service charge of $10 or $25 per month would be reasonable as a work expense, he said.
Telecommuting is one enterprise application Cisco is studying, but the one the company has highlighted is business-to-consumer connections. Medical centers could use Umi for virtual house calls by physicians, and universities could use it for distance learning, Cisco said. A trial with a health-care provider is already taking place, according to Cisco.
Both analysts were skeptical about businesses getting Umi into customers' homes.
"I'm not convinced that B-to-C is the way this is going to work," Scherf said.