The announcement of new apps by Cisco's (
) Flip camera business is a handy addition to Flip camera users,
but not that handy to the company's value. Here we take a look at
the impact of this development from a stock value perspective.
Cisco competes with Juniper (
) and Alcatel-Lucent in the network equipment business.
Our price estimate for Cisco stands at $24.20
, a premium of about 40% to market price.\
A Brief Look at the New Feature
Cisco's Flip camera business has announced enhanced social and
video sharing features (called FlipShare Groups) in the latest
version of its FlipShare software. This software provides a tool
for users to share videos and photos capture via their flip
cameras. The company will also offer FlipShare mobile apps for iOS
and Android-based mobile smartphones and tablets.
As evident in the company's recent statement, the initiative is
intended to capitalize on the surging demand for social networking
functionality in any and all new devices. Cisco recently
"After creating a FlipShare Group, users and their friends
can access their videos from FlipShare.com and through the
FlipShare Mobile apps that are now available for iPhone, iPad and
Android. Within FlipShare Groups users can comment, read and post
messages on each other's videos and groups."
Flip Cams - A Small Contribution to Cisco's Stock
Cisco entered the Flip camera business through its acquisition
of Pure Digital in 2009. We estimate that Linksys and the Flip
camera together constitute just over 1% of Cisco's stock value.
Quite a small contribution, as Cisco generates a substantial
majority of its profit by selling routers, switches and network
services. Although the new apps and software add a level of
attractiveness for shoppers looking to buy a new video camera, it
hardly matters to Cisco stock.
Ultimately, the camera business might not be the best business
for Cisco in the long run. Flip cameras derive their value from
high quality recording and ease of use. However, these features are
increasingly available in today's smartphones. So why should
consumers buy an alternate device?
If Cisco does want to stay in the camera business, it will need
to continuously innovate both software and hardware. For example,
connectivity to wireless networks on the go would enable quick and
easy online sharing. Nevertheless, it remains to be seen whether
Cisco can really hold its own in this space against established
consumer goods companies that have a bit more experience managing
and marketing these devices, as well as the impending threat of
more advanced smartphones.
See our complete analysis of Cisco stock