Cisco Continues Shift Away from Consumer Products, Sells Linksys Business To Belkin

Andrew Klips |

Lightening its consumer-focused business, Cisco Systems Inc. (CSCO) is selling its home networking business unit, which includes the popular Linksys brand, to privately-held network equipment company Belkin International Inc.  The purchase gives Playa Vista, California-based Belkin all of the products and technology in Cisco’s business unit, as well as the employees.

Terms of the sale were not disclosed.  The deal is expected to close in March 2013.

Belkin said in a corporate statement that it intends to maintain the Linksys brand and offer support for Linksys products as part of the transaction, including honoring warranties for current and future products.  With the acquisition, Belkin will account for about 30 percent of the U.S. retail home and small business networking market.

Cisco, an Irvine, California-based networking giant, originally bought Linksys in a stock deal valued at $500 million in 2003 as the company looked to branch-out into the consumer space.  Last month, Bloomberg cited people close to the matter as saying that Cisco had hired Barclays Plc (BCS) to shop Linksys.

Linksys might fetch less than the $500 millionCisco paid for it in 2003 because it is a mature consumer business with low margins, the people said in the Bloomberg report.

Belkin and Cisco intend to develop a strategic relationship on a variety of initiatives including retail distribution, strategic marketing and products for the service provider market, according to the Belkin statement on its website.

“While part of Cisco, Linksys has continuously innovated, while strengthening the brand and expanding its market leadership. As part of Cisco’s commitment to service providers, we are pleased about this strategic relationship with Belkin to build on Linksys’ position of strength,” said Hilton Romanski, VP Corporate Business Development at Cisco.

The move is the latest step by Cisco to distance itself from the consumer business and focus on its more profitable business offerings.  The company has cut nearly 8,000 jobs in the last two years in its consumer arms and closed units such as it Flip video/camera business.

On Thursday, Cisco said that it and NetApp (NTAP) were expanding their partnership to deliver new converged infrastructure innovation to unify branch office, data center and public cloud infrastructures under the FlexPod architecture to make it easier for customers to deploy and access next-generation cloud infrastructure solutions.  The companies already have more than 2,100 FlexPod customers across more than 35 countries and over 700 channel partners, according to a statement by Cisco.

On Wednesday, Cisco announced its intentions to buy Israel-based Intucell Ltd. for about $475 million gain its technology that helps mobile carriers control cellular networks.  In December, Cisco closed its $1.2-billion acquisition of Meraki Inc., gaining a portfolio of cloud networking products for businesses to remotely manage Wi-Fi networks.

Shares of CSCO closed Thursday at $21.02 and are pressing on 52-week highs of $21.18 made last week.  Over the past six months, shares have appreciated by about 42 percent.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
BCS Barclays PLC 8.67 -0.16 -1.81 677,823
CSCO Cisco Systems Inc. 30.92 -0.42 -1.34 1,817,046
MTH Meritage Homes Corporation 33.43 -0.32 -0.93 31,502
NTAP NetApp Inc. 35.20 -0.46 -1.29 188,675

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