Cisco Systems, Inc. (NASDAQ:CSCO), the world’s largest networking equipment maker, is reportedly planning to sell off its home wireless router division Linksys. People familiar with the situation told Bloomberg that Cisco has hired Barclays Plc (NYSE:BCS) to find a suitor for Linksys.
Cisco Systems, Inc (NASDAQ:CSCO) thinks the unit will attract television set makers that want technology and a recognized brand. In 2003, Cisco Systems paid $500 million to acquire Linksys in an attempt to enter into the consumer networking niche. Almost ten years later, Cisco is trying to exit this market. And Linksys is likely to fetch much less than what Cisco paid for it in 2003 because the consumer networking business is saturated with low margins.
Cisco Systems, Inc. (NASDAQ:CSCO) has had a poor experience in the consumer space, and sales in its core business are also declining. Though the company still dominates the IP routing market, its Ethernet switching business is having a hard time competing with rivals like Hewlett-Packard Company (NYSE:HPQ) and Huawei Technology Co. Ltd. (SHE:002502).
Selling Linksys is a part of Cisco’s strategy to exit consumer markets and focus primarily on corporate software and technology services. Last month it acquired the cloud-networking start-up Meraki. In the past two years, the company has closed many consumer businesses, including its Flip video-camera business. CEO John Chambers last year fired 14 percent of the company’s total workforce, or about 11,500 employees.
Linksys is not the only unit of Cisco in consumer business. NDS Group Ltd. that develops software for paid television channels and Scientific Atlanta are two other business units of Cisco in the same space. The networking equipment maker acquired NDS for $5 billion in July this year.
Barclays Plc (NYSE:BCS) is also helping Google Inc (NASDAQ:GOOG) sell its Motorola Home Business division.