is selling its Home Networking Business unit to Belkin. The line includes the Linksys brand, and the acquisition includes Cisco employees. Financial terms of the deal were not disclosed.
Belkin's motives for purchasing Cisco's Home Networking Business unit are clear. Chet Pipkin, CEO of Belkin, put it this way: "Belkin's ultimate goal is to be the global leader in the connected home and wireless networking space, and this acquisition is an important step to realizing that vision."
After the transaction closes, Belkin will own about 30 percent of the U.S. retail home and small-business networking market. And the Linksys brand won't die out. Belkin plans to keep it alive and even offer support for Linksys products sold under Cisco's watch. In other words, Belkin will honor all valid warranties on current and future Linksys product sales.
Leveraging the Network
Pipkin acknowledged Linksys for its pioneering work in wireless connectivity and its strong brand. Of course, Linksys did some of that work pre-Cisco. Cisco purchased Linksys in 2003 for $500 million. Cisco made heavy investments after the acquisition.
In fact, just days ago, Cisco announced the expansion of the Linksys Smart Wi-Fi portfolio with three new 802.11ac powered Smart Wi-Fi routers, a new compact 802.11ac USB adapter, new features and new Smart Wi-Fi apps. Cisco announced a new cloud platform for Linksys last summer and got the developer community involved in designing apps and services for Linksys last spring.
Belkin and Cisco are developing a strategic relationship that includes retail distribution, strategic marketing and products for the service provider market. Pipkin expects Belkin to create new opportunities for consumers, distribution partners and resellers, and promises to have the strongest retail presence in the U.S. networking marketplace.
"Belkin also will have access to a large installed base that will be able to upgrade their networking environment to take advantage of new technologies in the smartphone, tablet, notebook and home automation arenas," he said. "Additionally, Linksys will enhance Belkin's capabilities to meet the needs of the service provider space and small-business users."
Cisco's Timing Good
Zeus Kerravala, principal analyst at ZK Research, told us he's not surprised that Cisco would sell off Linksys, given Cisco's stated intention to stick to its core business. Linksys, he said, stuck out like a sore thumb.
"Cisco likes to sell architecturally -- that means multiple products make up the solution -- and even the set-top box is part of the cable architecture, but Linksys isn't really part of anything," Kerravala said.
Although Kerravala understood Cisco's reasoning for buying Linksys in 2003 -- there was plenty of debate 10 years ago about how the home network would be built, and talk about PCs being at the center of home entertainment systems -- the reality is that many assets are moving to the cloud. The only role the Linksys router plays right now is one of connectivity.
"Linksys is rapidly becoming a commodity. From Cisco's standpoint the timing was good. They still have a large share and a premium product," Kerravala said. "But I don't think that would have lasted forever, especially for a company that de-emphasized the consumer business. So it was time to move along and it served its purpose and now the company is heading in a different direction."
The transaction is subject to various standard closing conditions and is expected to close in March.