SAN JOSE, Calif. — Armed with a slew of consumer acquisitions ranging from Linksys (routers) to Scientific-Atlanta (set tops) and Pure Digital (Flip video), Cisco Systems is poised to build a template for what it calls the CE (consumer electronics) company, Version 2.0."

That's something Sony Corp. CEO Howard Stringer must be dying to emulate, as evidenced by Sony's renewed commitment to network devices and Stringer's recent vow to Sony shareholders, "We are not going to be beaten again in the network age."

Beware of bosses bearing bluster.

Cisco's consumer play is not in hardware. The company is not even interested in competing with others on price, performance or the number of consumer models it offers. Instead, its sole focus is software and "cloud-based services" consumers and its network gear can leverage.

That view is a world apart from traditional consumer electronics giants, who remain enamored with hardware and performance.

In a recent interview with EE Times, Ken Wirt, vice president of consumer marketing at Cisco, called the current CE business "disrupted" and "in transition," largely broken as a result of low prices and bad margins.

"In 1982, when the Compact Disc was introduced," Wirt said, "consumer electronics was all about its fidelity and resolution." The pursuit of the "more realistic" reproduction of audio was carried to video, eventually leading to digital HDTV, digital camcorders, DVDs and Blu-ray.

"Looking at the next 10 years, connectivity will become the major impetus of consumer electronics," predicted Wirt. Since "every single consumer device today wants to be connected," added Wirt, "consumer electronics' is about to be transformed to 'consumer experience'."

With the progression from the iPhone to iTunes to its App Store, Apple's success rests not on devices alone, but on software and services. The same principle applies to Flip video.

Instead of competing with others on performance or product variety, Cisco's Pure Digital offers Flip software that helps consumers perform rough edits and uploads, link to online services and share video, Wirt said.

There are plenty of reasons why consumer electronics companies will want to embrace the concept of the CE company, 2.0. After all, software and services both present "chances for better margins and recurring revenue streams," Wirt noted.

For traditional CE companies bogged down with mature products lines like TVs, DVDs and set-top boxes, it still takes a leap of faith to invest in new software and services. Indeed, many CE vendors have invested much time and resources building consortia for software standards and platforms. Examples include HAVI, HANA, MHP, Coral and DLNA.

Still, not one consumer company has so far risked capital on a piece of popular software or a service that subsequently changed the game for boosting sales of CE devices.

If Cisco's endgame is to make it easier to move video and other content around the home and to the Web, the network giant still has a long way to go.