I would imagine that Cisco thought they could expand into the consumer market and make good money. I am not sure why that did not happen but if it caused them to lose focus from their core business than that can be a dangerous thing in the global marketplace. I have used Cisco products and always been happy with them. This looks like a serious mid-course correction and a painful one at that.
"The networking giant looked like an out of place midget at the CES carnival." Great comment Rick, and so true. Consumer electronics is a very different animal than infrastructure business, and Cisco isn't the first company to learn that the hard way.
CISCO has been a growth company. But now it is sitting on a huge pile of cash, which makes it look more like a value company. To truly become a value company, it has to dish out dividends instead of using the cash for M&A, and that will turn it into a sitting duck for its competitors to catch up. Its "core business" is not growing very much so turning into consumer electronics is not a very bad idea on paper, especially in light of the explosive growth of smartphones and Skype. The problem is that it is too early for the market and CISCO is not experienced in the consumer market. But better early than late, the company has the cash to experiment and hope it will learn from the recent stumbles. As Larry pointed out, when the time comes, the company with the right product at the right time will win. BTW, I have a CISCO E3000 and I really loves, it is too early to write off the Linksys purchase.
Cisco jumped into the consumer space because its core infrastructure business was slowing down due to the excess of dark fiber left over from the late '90s buildout binge. It seems like the best path forward is to refocus on that core business, since video streaming is eating up that excess very quickly. Sooner or later someone is going to bite the bullet and seriously roll out fiber to the home in the US, and that is going to be very lucrative for someone who has the right product at the right price.
I believe Cisco should still continue to expand its business and acquire strategic units. By identifying unique industries with huge growth potential, Cisco can expand its dominance across markets.
An example is its expansion into the smart grid business. Having complete product suites of sensors, routers and switches could unlock great revenue potentials.
The difficult part is identifying or creating such opportunities in the market.