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.