* Cisco expands further into consumer market
* "Umi" available next month for $599, plus $24.99/month
* Analysts say price may hinder sales
(Adds background on Tandberg, Skype)
By Gabriel Madway
SAN FRANCISCO, Oct 6 Cisco Systems Inc (CSCO.O)
launched a $599 home videoconference system, a high-quality
rival to Skype and other low-cost providers, as the network
equipment maker seeks to expand in the consumer market.
The high price, and a $24.99 monthly fee, may make it tough
for Cisco to win much of a following among consumers, many of
whom are using free, online video chat services, analysts
But they also said the move shows the company is set on
keeping up double-digit revenue growth even as its traditional
routing equipment business matures, by expanding its target
from business clients to consumers.
"I think the difficulty is probably the monthly price. $300
a year forever, that's a lot of money," said Gartner analyst
Ken Dulaney. "But this is a premium product. And I think it
will set the imagination off with a lot of people."
The home TelePresence system, called "umi," features a
camera and console that connects to a standard high-definition
TV and works over high-speed Internet. Its biggest selling
point is high quality, real-time video without the pixelations
and interruptions of low- or no-cost online services. It also
allows unlimited calls, video messaging and video storage.
The product will be available next month, and can be
pre-ordered on Cisco's website. Best Buy (BBY.N) will sell it
starting next month, and Verizon Communications Inc (VZ.N) will
sell it starting next year, Cisco said.
BOARDROOM TO LIVING ROOM
Cisco already sells a high-end videoconference system for
businesses. These systems, often built to simulate
boardroom-like settings, can cost around $300,000 per unit.
They feature high-quality video and sound, with limited delays,
making users almost feel like they are meeting in person.
Despite initial skepticism over whether many businesses
would pay so much, particularly in a weak global economy,
TelePresence has become one of Cisco's fastest-selling products
as companies seek ways to save on travel costs. Its recent
acquisition of Norway's Tandberg also made it the world's
leader in videoconferencing systems.
The company had made no secret of its ambition to replicate
that success in the consumer market, and Chief Executive John
Chambers repeatedly vowed to come out with a cheaper version.
While Cisco has not yet established itself as a consumer
brand, it wouldn't be its first foray into the living room. It
has acquired home router maker Linksys, cable set-top box maker
Scientific-Atlanta, and more recently, the company that makes
the Flip video camera.
Cisco has also been advertising itself heavily in the past
year, through product placements in shows like 30 Rock and
advertisements using actress Ellen Page.
Analysts said the high price of umi may mean mass adoption
is years away. Many predicted the price to come down over the
next few years, but they also noted the likelihood that
competitors like Skype would introduce higher-quality services
in the meantime.
Skype said in its blog that a $599 device could be "subject
to obsoletism at the hands of mass-market options."
"And, when unbeatable lower cost, high performance options
are readily available, spending at the top-end can be like
throwing money away, especially if you are buying a video
calling system and there is no one else to call," wrote an
executive, Jonathan Christensen.
In a sign of more rivalry ahead, Skype last month said it
was teaming up with Avaya to sell communications systems to
businesses. It also hired Tony Bates, a veteran Cisco
executive, as its chief executive earlier this week.
Marthin De Beer, head of Cisco's emerging technologies
business group, said umi's quality made it different from
"It is different, it's a new class of product and you will
see that the experience is transformational," he said at a
launch event in San Francisco.
He also predicted it would lead to new opportunities like
distance-learning and remote medical care in the future.
Some analysts also said that even if Cisco has a hard time
competing with the likes of Skype, it would not necessarily be
a big loss. A growth in popularity of Web chats in general
drives up Internet traffic, boosting demand for routers and
switches, Cisco's traditional bread and butter.
"A lot of Cisco's efforts are dedicated to promoting
greater demand for the other things if they sell, like the
routers," said Gartner's Dulaney.
(Additional reporting by Sinead Carew. Writing by Ritsuko
Ando; Editing by Richard Chang)