Cisco Begins Push Of Pricey Home Video-Conferencing System

Date : 11/12/2010 @ 3:41PM
Source : Dow Jones News
Stock : Logitech International S.A. - Registered Shares (MM) (LOGI)
Quote : 36.71  0.1 (0.27%) @ 8:00PM

Cisco Begins Push Of Pricey Home Video-Conferencing System

Cisco Systems, Inc. (MM) (NASDAQ:CSCO)
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Cisco Systems Inc. (CSCO) faces a hard sell with its high-end home video-conferencing system, known as Umi.

In Umi, Cisco will have a lot of explaining to do. Beyond its name--it's short for "you and me"--the company will have to convince consumers that the system is worth paying $599 upfront and $24.99 a month. Cisco and exclusive retail partner Best Buy Co. (BBY) will begin selling Umi on Sunday.

Umi represents Cisco's boldest move into the consumer market, an area the network-equipment maker has long sought to enter. The company said it plans an expensive (even by its own standards) marketing campaign to promote the product, which evolved out of a more expensive corporate version, called telepresence. The launch comes at a time when some believe Cisco has spread itself too thin with 30 new business initiatives.

One of Chief Executive John Chambers' highest priorities is the consumer. But with all of the success Cisco enjoys with large corporations and government customers, its history with the mass market has been mixed, despite a significant push over the past few years to generate public awareness. Critics don't believe Umi will materially change its track record, with particular skepticism around its hefty price tag and monthly service fee.

"We believe the product is of great quality, but we think that the pricing is all wrong," said Ken Dulaney, an analyst at Gartner.

Cisco argues Umi is a high-end system, and that its likeliest customers--early adopters and people who greatly value staying in touch with family and friends--make at least $75,000 a year.

"We're not saying this is for everybody," said Gina Clark, vice president of Cisco's telepresence business. "This is definitely a premium product and premium experience for people who want to stay in touch."

Best Buy plans to sell Umi within the Magnolia Home Theater section of its stores. Steve Delp, chief operating officer of Magnolia, said each store will have two Umi systems for video calls to better demonstrate the product.

While Cisco said Umi--which utilizes a home's high-definition TV--provides a more immersive experience, the company will be hard pressed to justify the lofty price tag over free services offered by Skype and Apple Inc.'s (AAPL) Facetime. Dulaney noted that attaching a high-definition camera on top of Logitech International S.A.'s (LOGI) Google TV box could create a similar experience.

The company also faces the challenge of getting enough Umi systems in the market so consumers can talk to each other. In an effort to expand the user base, Clark said the system also will work with Google Inc.'s (GOOG) video chat, and Cisco is working to ensure interoperability with other video services.

Cisco, though, may be ahead of the curve in its early push for more video communications in the home, said Maribel Lopez, an analyst for Lopez Research. Some day, the technology will be ideal for getting remote medical care. But it isn't quite there yet, she said.

Cisco is taking steps to make sure it gets here quicker. The company plans to set up model homes in malls across the country with a test Umi system. It also plans a national campaign featuring actress Ellen Page, who already has been the pitchwoman for the corporate telepresence system.

Delp, however, believes a live demonstration is the only way to win consumers over.

"Everyone I've shown this to, their jaw drops," he said.

-By Roger Cheng, Dow Jones Newswires; 212-416-2153;


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