The company is also retrenching on another consumer video business — home videoconferencing. In November, it started selling the umi, a $599 box that turns a high-definition TV into a big videophone. But signs soon emerged that the umi wasn't doing well. It cut the price of the unit in March, along with the monthly service fee, which went from $24.95 per month to $99 per year.
On Tuesday, Cisco said it will fold umi into its corporate videoconferencing business and stop selling the box through retailers. Instead, it will sell it through corporate channels and Internet service providers.
Cisco's Home Networking business, which makes Wi-Fi routers and has the 2003 acquisition of Linksys at its core, will be "refocused for greater profitability," but Cisco will keep selling the routers in stores.
Cisco shares fell 3 cents to close at $17.44 Tuesday. The shares are close to their 52-week low of $16.97, hit a month ago.
Analyst Simon Leopold at Morgan Keegan said the pullback on the consumer side is a good thing for investors, but not enough to set off a stock rally.
Consumer products have been a drag on Cisco's results because they carry profit margins that are far lower than the big-ticket capital equipment the company sells to corporations and governments, Leopold said. But the drag has been minor, because consumer products are still only a small part of Cisco's overall business.